Cabinet has welcomed the 2025 National Budget as it seeks to maintain a balance between South Africa’s fiscal framework, fund the priorities of the seventh administration while mitigating negative impact on poor and middle-income households.
The budget was tabled by the Minister of Finance, Enoch Godongwana, in the National Assembly, on Wednesday.
He outlined all the financial, economic and social commitments the government will prioritise in its planned expenditure and provided a detailed plan for 2025 spending. This includes proposals for revenue collection to help fund the government’s planned interventions and commitments.
“The allocation of over R1 trillion to infrastructure development over the Medium-Term Expenditure Framework (MTEF), the establishment of alternative infrastructure financing through a credit guarantee vehicle and the introduction of multiple bid windows on the Budget Facility for infrastructure is a demonstration of commitment to grow the economy through a strong infrastructure-build programme, whilst simultaneously improving service delivery.
“Mechanisms for private sector participation as announced with the Budget, which are part of Operation Vulindlela driven reforms, in the energy, transport and freight logistics sectors indicate government’s commitment to fast-tracking private sector investment and inclusive economic growth,” Minister in The Presidency, Khumbudzo Ntshavheni, said on Thursday.
Minister Ntshavheni was briefing the media in Cape Town, following Cabinet’s meeting on Wednesday.
Operation Vulindlela is aimed at stabilising the supply of electricity; creating a competitive and efficient freight logistics system; reducing the cost and improving the quality of digital communication; ensuring a stable, quality supply of water; and reforming the visa regime to facilitate skilled immigration and support tourism.
READ | Operation Vulindlela records notable progress
Since its establishment in 2020, Operation Vulindlela has made real progress in achieving these objectives.
In light of new and persistent spending pressures in health, education, transport and security, government decided to raise value-added tax (VAT) by 0.5 percentage points in each of the next two years, which will bring VAT to 16% in the 2026/27 financial year.
READ | Government proposes VAT increase over two years
The first 0.5 percentage point increase in the VAT rate will take effect on 1 May 2025 and the second 0.5 percentage point increase will take effect on 1 April 2026.
“Acknowledging the impact of the tax increases, the Budget provides for mitigation measures against the increases such as no increase in the fuel levy, above inflation increases to social grants, with old age and disability grants increasing by R130 to R2315 in 2025 and significant funding allocation to PRASA [ Passenger Rail Agency of South Africa] to improve passenger rail transport which will reduce household income spend on transport costs.
“Most significantly, the tax increases are going to finance sustainability of this country, by maintaining 11,000 teachers in the classrooms, 9300 health-workers in their jobs, the employment of 800 post-community service doctors and allow an additional 700, 000 children (4-years of age) access to early childhood development which is the necessary foundation education they need for a successful education journey,” Ntshavheni explained. –SAnews.gov.za
