Economic Overview

• The 2025 Budget aims to stimulate faster economic growth while stabilizing public finances.
• GDP growth is projected to average 1.8% over the next three years, with 1.9% expected in 2025 (up from 0.8% in 2024).
• Government debt is forecast to stabilize at 76.2% of GDP in 2025/26, with debt-service costs consuming 22 cents of every rand of revenue.
• To manage spending pressures, the VAT rate will increase by 0.5 percentage points in each of the next two years.

Key Spending Priorities

• Infrastructure Investment: R1.03 trillion allocated over three years, with major investments in roads (R402 billion), energy (R219.2 billion), and water and sanitation (R156.3 billion).
• Social Protection: 61% of non-interest spending will support low-income and vulnerable households.
• Education & Healthcare: Additional funds allocated to expand early childhood development, hire healthcare workers, and improve medicine availability.

Tax and Fiscal Policy Adjustments

• Revenue Measures:
  • R28 billion in additional tax revenue in 2025/26 and R14.5 billion in 2026/27.
  • VAT increase from 15% to 16% over two years.
  • No inflationary adjustment to personal income tax brackets.
  • Excise duties on alcohol and tobacco increased above inflation.
• Deficit and Debt Management:
  • The consolidated budget deficit is projected to decline from 5% of GDP in 2024/25 to 3.5% by 2027/28.
  • The government aims to achieve a debt-stabilizing primary surplus by 2025/26.

Reforms and Structural Adjustments

• Operation Vulindlela Phase II will focus on local government reforms, reducing spatial inequality, and digital transformation.
• Public-Private Partnerships (PPP) Reform: Streamlining regulations for projects under R2 billion to encourage private sector investment.
• State-Owned Enterprises (SOEs):
  • Eskom and Transnet remain financially weak, with no additional government bailouts planned.
  • The government will provide targeted capital investment support through credit guarantees and financing mechanisms.

Mitigating the Impact of Tax Increases

• Increases in old-age, disability, and child support grants to cushion vulnerable households.
• Expansion of VAT zero-rated items, including canned vegetables and additional staple foods.
• Fuel levy and RAF levy remain unchanged to limit cost-of-living increases.

The 2025 Budget prioritizes economic growth, fiscal sustainability, and infrastructure investment while balancing revenue increases with social protection measures. Structural reforms and tax adjustments are central to ensuring long-term fiscal stability and public service delivery improvements.

To read the entire Budget Presentation, click here.