The Parliamentary Budget Office releases the 2025 Budget Analysis

To read the entire budget analysis, click here.

The 2025 Budget presents a crucial opportunity for South Africa to realign its financial strategy with the National Development Plan (NDP) and the Medium-Term Development Plan (MTDP) leading up to 2030. While some progress has been made, challenges such as slow economic growth, high unemployment, and inequality persist. Prolonged fiscal consolidation has exacerbated these issues, increasing debt and hindering poverty reduction and job creation.

This year’s budget shifts focus towards increased government spending and targeted investments, moving away from ineffective austerity measures. A proposed VAT increase aims to boost revenue, though concerns remain about its impact on vulnerable populations. The budget also prioritizes infrastructure and job creation but must balance spending allocations to critical sectors like education, health, and social services.

Despite planned increases in social wage spending, real per capita allocations have fluctuated, with projections indicating further declines after 2025/26. Inflation in medical services and underinvestment in infrastructure further strain government resources. Addressing fiscal sustainability remains a challenge, with rising debt levels and struggling state-owned enterprises (SOEs) limiting economic capacity.

To achieve long-term structural transformation, the government must reconcile fiscal policies with developmental goals. Efforts to enhance tax compliance, optimize spending, and improve SOE efficiency are vital to ensuring inclusive growth, reducing inequality, and strengthening human capital development across South Africa.