South African Finance Minister Enoch Godongwana on Wednesday reintroduced the 2025 national budget to Parliament, formally discarding the proposed increase in value-added tax (VAT) and reiterating the government’s commitment to prioritising social welfare and infrastructure-led growth, while maintaining a trajectory of fiscal consolidation.
The re-tabling follows a three-month delay stemming from internal disputes within the African National Congress (ANC)-led coalition, particularly around the proposed VAT increase, originally floated in the budget review delivered on 12 March. At that time, Minister Godongwana outlined a phased increment of 0.5 percentage points annually over two fiscal years, aiming to elevate VAT from 15% to 16% by 2026/27.
However, mounting political opposition from coalition partners and a legal challenge led by the Economic Freedom Fighters (EFF)—under the leadership of Julius Malema—resulted in a politically bruising reversal for the ANC. The legal contestation against the VAT proposal, based on the disproportionate impact it would have had on low-income households, exerted significant pressure on the ruling party. Notably, this legislative volte-face unfolded while President Cyril Ramaphosa was abroad addressing geopolitical tensions during a high-level diplomatic engagement in the United States.
“This decision demonstrates our commitment to listening to South Africans and all the political parties represented in this House,” Minister Godongwana stated during the National Assembly plenary, affirming that VAT would remain at its current rate of 15%.
In lieu of the VAT increase, the minister announced that fuel levies would be adjusted in line with inflationary trends, providing an alternative mechanism to bolster revenue without exacerbating the cost burden on essential goods. This nuanced recalibration appears to reflect both political expediency and responsiveness to fiscal equity concerns.
Economic projections have also been revised downward in the updated budget. Growth for 2025 is now expected to reach 1.4%, down from the 1.9% anticipated in March. Forecasts suggest a gradual recovery, with GDP growth projected to rise to 1.6% in 2026 and 1.8% by 2027.
Government debt, meanwhile, is now forecast to stabilise at 77.4% of GDP, a slight uptick from the 76.2% projection in the March statement. Despite this, the National Treasury remains focused on achieving a primary budget surplus by reducing the growth rate of public expenditure relative to revenue intake.
The revised fiscal framework preserves key spending commitments, including the continuation of the Social Relief of Distress Grant and incremental increases to all other social grants. The government has reaffirmed its pledge to invest over 1 trillion rand (approximately 55.8 billion USD) in public infrastructure over a three-year horizon, a cornerstone initiative aimed at stimulating domestic economic activity and enhancing long-term productivity.
“The budget supports economic activity while raising future economic prospects, directs spending toward the social wage, and invests in state capability and critical infrastructure, all the while promoting fiscal sustainability,” Godongwana concluded.
The re-tabled budget represents a calculated political retreat for the ANC amid mounting coalition fragility, with the EFF’s legal manoeuvring and civil society backlash underscoring the delicate balance the party must maintain in the current multiparty governance environment. As the country grapples with subdued economic growth and elevated debt levels, the revised budget appears calibrated to avoid exacerbating inequality while sustaining investor confidence and macroeconomic credibility.
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South Africa’s Finance Minister Enoch Godongwana re-tables the 2025 budget, excluding a proposed VAT hike amidst political pressure and legal challenges, while focusing on social spending and infrastructure investment.
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South Africa, 2025 Budget, Enoch Godongwana, VAT, ANC, Julius Malema, Economic Freedom Fighters, Cyril Ramaphosa, fiscal policy, infrastructure investment, public debt, National Treasury, coalition politics, South African Parliament
