Finance Minister Enoch Godongwana delivered the third reiteration of the 2025 National Budget Speech on Wednesday (21 May).<\/p>\n\n\n\n
The budget revised several key points, including the country\u2019s economic status, growth projections, substantial debt servicing costs, the withdrawal of the contentious VAT increases, and the continuation of the social relief grant.<\/p>\n\n\n\n
However, to balance the withdrawal of the VAT hike, Godongwana noted that fuel taxes would be adjusted for inflation.<\/p>\n\n\n\n
He also noted that despite sluggish growth over the past decade, South Africa\u2019s economy will likely expand by only 1.4% this year, lower than the 1.8% projected in March.<\/p>\n\n\n\n
\u201cThe global economy is facing heightened trade tensions and elevated policy uncertainty, with worrying economic consequences,\u201d Godongwana said.<\/p>\n\n\n\n
The new budget outlines spending cuts of R69.4 billion over three years, with the education, health, and home affairs departments and Transnet bearing the brunt. <\/p>\n\n\n\n
These cuts fill most of the gap left after the scrapping of a previously proposed VAT hike that some members of the GNU rejected. <\/p>\n\n\n\n
However, the withdrawal of the VAT hike and a weaker economic outlook mean the National Treasury will have around R62 billion less revenue to work with over the next three years.<\/p>\n\n\n\n
The slower growth will also result in South Africa\u2019s debt-to-gross domestic product ratio peaking at 77.4% in the fiscal year through March 2025. <\/p>\n\n\n\n
This is a slight increase from a 76.2% peak forecast in the March budget and 75.5% in the October 2024 mid-term update.<\/p>\n\n\n\n
The new budget also sees the national borrowing requirement at R588 billion in 2025\/26, around R6 billion more than planned in March.<\/p>\n\n\n\n
Although the proposed VAT hike was scrapped, the budget will still increase taxes by R18 billion this year by not adjusting income tax brackets for inflation, a carryover from the previous proposals. <\/p>\n\n\n\n
Additionally, it will raise petrol and diesel levies in line with inflation. By leaving such measures in place, an additional R20 billion of tax income was pencilled in for the 2026 Budget. <\/p>\n\n\n\n
\u201cI believe this budget supports economic activity while raising future economic prospects, directs spending towards the social wage, and invests in state capability and critical infrastructure,\u201d said Godongwana. <\/p>\n\n\n\n
He added that negotiation, debate, and compromise, as we have seen unfold over the last weeks, have been necessary, if sometimes painful, investments in the productivity of future government reform in the new political environment.<\/p>\n\n\n\n
\u201cWe have all gained a better, deeper appreciation of each other\u2019s policy positions and which trade-offs each of us is willing to contemplate,\u201d he said. <\/p>\n\n\n\n
Here are the biggest takeaways from the mid-term budget:<\/p>\n\n\n\n
The National Treasury has decided not to go ahead with plans to increase value-added tax (VAT) following objections from members of the governing alliance. <\/p>\n\n\n\n
Godongwana said this decision will help contain inflation and boost consumer spending, benefiting retailers and manufacturers. <\/p>\n\n\n\n
\u201cThe debate surrounding the proposed VAT increase on March 12 was intense and significant, creating some uncertainty,\u201d said Godongwana.<\/p>\n\n\n\n
However, we now have clarity: VAT will remain at 15%. This decision demonstrates our commitment to listening to South Africans and all the political parties represented in this House.\u201d<\/p>\n\n\n\n
Finance Minister Enoch Godogwana has announced an inflation-based increase to fuel taxes in the country, ending a three-year freeze.<\/p>\n\n\n\n
The Treasury raised levies on petrol by 16 cents per litre and on diesel by 15 cents per litre to help offset lost revenue from the withdrawal of the VAT rate increase.<\/p>\n\n\n\n
This will result in inflationary increases in the general fuel levy for petrol and diesel to R4.01c\/l and R3.85c\/l, respectively, effective from 4 June 2025.<\/p>\n\n\n\n
The Road Accident Fund levy will not be changed and will remain at R2.18, while the carbon fuel tax levy will keep the same 3 cents per litre increase seen in previous budgets.<\/p>\n\n\n\n
This means that the combined tax increase is 18\/19 cents per litre, bringing total taxes to R6.37 for petrol (30% of the total price) and R6.24 for diesel (33% of the total price).<\/p>\n\n\n\n