Finance Minister Enoch Godongwana delivered the 2025 National Budget Speech on Wednesday (12 March).<\/p>\n\n\n\n
The budget addressed several key points, including the country’s current economic status, growth projections, substantial debt servicing costs, proposed increases in VAT and sin taxes, and the continuation of the social relief grant.<\/p>\n\n\n\n
A major sticking point for many over the past weeks leading up to the budget was the increase in VAT, which has still been pushed through, albeit at a revised 1%pts over the next two financial years.<\/p>\n\n\n\n
However, to balance the reduction in the VAT hike, Godongwana noted that personal income tax brackets and medical aid tax credits would not be adjusted for inflation. <\/p>\n\n\n\n
Godongwana also noted that despite sluggish growth over the past decade, South Africa\u2019s economy is projected to grow at an average of 1.8% from 2025 to 2027.<\/p>\n\n\n\n
\u201cThe truth is our economy has stagnated for over a decade. In that time, GDP growth has averaged less than 2%, far below the level required to meet our expanding list of needs.<\/p>\n\n\n\n
\u201cIn 2024, the economy grew by only 0.6%. Over the medium term, GDP growth is projected to average 1.8%.<\/p>\n\n\n\n
\u201cTo meet our goals of redistribution, redress and structural transformation, the economy needs to grow much faster and in an inclusive manner. This is the central objective of the current administration,\u201d Godongwana said.<\/p>\n\n\n\n
The minister added that the medium-term outlook is supported by higher investment and household consumption, aided by a stable inflation outlook, moderate employment gains, and improving household balance sheets. <\/p>\n\n\n\n
\u201cContinued easing of structural constraints will support the economy by fostering additional investment, including in infrastructure,\u201d he said.<\/p>\n\n\n\n
Real economic growth is forecast to reach 1.9%, while the consolidated budget deficit is expected to contract from 5% of GDP in 2024\/24 to some 3.5% in 2027\/28.<\/p>\n\n\n\n
Real GDP is projected to grow to 1.9% in 2025, down to 1.75% in 2026 and back up to 1.9% in 2027.<\/p>\n\n\n\n
The higher budget deficit means that debt-service costs in 2024\/25 have been revised higher by an additional R33.6 billion to R389.6 billion. This translates to 22 cents of every rand we raise in revenue.<\/p>\n\n\n\n
Godongwana said that to put this into perspective, spending on debt-service costs is greater than the respective budgets for health, the police, and basic education.<\/p>\n\n\n\n
Debt will now peak at 76.2% of GDP in 2025\/26.<\/p>\n\n\n\n