South Africa’s 2025 Budget, presented by Finance Minister Enoch Godongwana, proposes a VAT increase, significant funding for key social programs, and R1 trillion for public infrastructure. It prioritizes state capability enhancements and allocates funds for health, social grants, and disaster recovery. Key investments are set to bolster the nation’s economy while enhancing service delivery.
In a recent session in Parliament, South Africa’s Finance Minister Enoch Godongwana presented the 2025 Budget. This presentation followed a special Cabinet meeting aimed at addressing prior contentions regarding a proposed VAT increase, which had initially postponed the budget unveiling. The Government of National Unity (GNU) ultimately approved a budget inclusive of a disputed VAT increase designed to enhance public revenue.
Key revenue measures include a planned increase of the VAT rate by 0.5 percentage points for the fiscal years 2025/26 and 2026/27, raising it to 16%. Notably, there will be no inflationary adjustments to personal income tax brackets, rebates, or medical tax credits, which are projected to generate R28 billion in revenue for 2025/26 and an additional R14.5 billion in 2026/27. Furthermore, R3.5 billion has been allocated to the South African Revenue Service (SARS) for the current year, with R4 billion designated for the medium term.
The budget also emphasizes substantial spending priorities, including an extra R232.6 billion for essential programs throughout the medium term. Provinces will benefit from a total of R2.4 trillion allocated over the Medium-Term Expenditure Framework (MTEF) period, while local government funding will rise significantly from R99.5 billion to R115.7 billion by 2027/28. Additional allocations include R7.3 billion for a public sector wage agreement and R10 billion towards Early Childhood Development subsidies. Health expenditure will rise from R277 billion to R329 billion by 2027/28, while social grants will receive increments and COVID-19 social relief will be extended for one more year, receiving R35.2 billion.
In terms of infrastructure investment, the budget outlines a substantial R1 trillion allocated for public infrastructure development over the next three years. Specific allocations include R402 billion for transport and logistics, R219.2 billion for energy infrastructure, and R156.3 billion for water and sanitation projects. New public-private partnership (PPP) regulations are expected to come into effect on June 1, 2025, alongside the reconfiguration of the Budget Facility for Infrastructure to facilitate multiple bid windows and the issuance of the first infrastructure bond in 2025/26.
Moreover, the Budget reforms focus on enhancing the state’s capability and managing expenditures more effectively. The Treasury will spearhead efforts to improve budgeting efficiency, including an audit to eliminate “ghost workers” from national and provincial departments. The budget allocates R1.7 billion for potential future disasters and R4 billion for recovery from existing backlogs, promoting sustainable fiscal practices.
In summary, South Africa’s 2025 Budget reflects a commitment to revenue generation, enhanced social services, and public infrastructure development. Significant increases in the VAT rate, along with substantial allocations for health, education, and social grants, aim to improve the nation’s fiscal health. The budget also introduces reforms targeting state capability and efficiency, setting the stage for sustainable economic growth in the years to come.
Original Source: allafrica.com
