- VAT to increase to 16% by 2026 to fund public services and infrastructure projects.
- Public infrastructure investment to exceed R1 trillion over the next three years.
- Social grants increase, with the COVID-19 relief grant extended until March 2026.
Finance Minister Enoch Godongwana delivered the 2025 Budget Speech on Wednesday, emphasizing economic growth, fiscal discipline, and public infrastructure investment to drive South Africa’s economic recovery. Despite a stagnant GDP growth of 0.6% in 2024, the government remains committed to structural reforms, infrastructure expansion, and social spending.
Economic Outlook and Fiscal Policy
Godongwana acknowledged the country’s slow economic growth and mounting debt challenges but reiterated the government’s commitment to macroeconomic stability and fiscal consolidation. He announced that government debt will stabilize at 76.2% of GDP in 2025/26, while the budget deficit will narrow to 3.5% by 2027/28.
To address funding shortfalls, the government has proposed a gradual VAT increase, with rates rising to 15.5% in 2025/26 and 16% in 2026/27. No adjustments will be made to personal income tax brackets, and the fuel levy will remain unchanged to ease cost-of-living pressures.
Infrastructure and Economic Reforms
Public infrastructure investment is a key focus, with over R1 trillion allocated for transport, energy, and water projects over the next three years. Key allocations include:
- R402 billion for transport and logistics improvements.
- R219.2 billion for energy infrastructure to boost electricity supply.
- R156.3 billion for water and sanitation projects.
The Passenger Rail Agency of South Africa (PRASA) will receive an additional R19.2 billion for critical railway upgrades, ensuring that commuter rail services are more efficient and accessible.
Social Relief and Public Services
Recognizing ongoing economic hardships, the government has increased social grants and extended the COVID-19 Social Relief of Distress (SRD) grant until March 2026, with R35.2 billion allocated for this purpose. Other social support measures include:
- Old age and disability grants increased by R130 to R2,315 per month.
- Child support grants raised by R30 to R560 per month.
- Foster care grants increased by R70.
Job Creation and Education
To bolster employment and support essential services, an additional R28.9 billion is allocated to the health sector to retain 9,300 healthcare workers and employ 800 post-community service doctors. Education funding will also rise, with R19.1 billion allocated to retain 11,000 teachers and an additional R10 billion to expand Early Childhood Development (ECD) programs.
Minister Godongwana reaffirmed the government’s commitment to economic recovery, social protection, and long-term sustainability. While the proposed tax increases are expected to spark debate, the focus on infrastructure, job creation, and social support is aimed at stabilizing the economy and fostering inclusive growth.
The full budget details and sectoral breakdowns are available on the official National Treasury website.
