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Minister of Finance Mr. Enoch Godongwana delivered the budget speech, which was delayed by three weeks -
in Cape Town on 12 March 2025.
According to Mr. Godongwana, our economy has stagnated for over a decade - the GDP growth has averaged less than 2 %, causing a considerable demand in our expanding list of needs. In 2024, the economy expanded by only 0.6 %.
The central objective of the budget speech is to unite our goals of redistribution, redress, structural transformation, and economic growth in an inclusive manner. In essence, Mr. Godongwana states that an increase in revenue will enable the government to reduce debt-service costs and build up a fiscal buffer to protect against future economic shocks like COVID-19.
It is crucial to recognise the implications of a new budget, as it directly affects the take-home income of every South African citizen and influences crime rates. Changes in taxation, social spending, and law enforcement funding can either alleviate financial strain or create economic pressures that contribute to increased criminal activity.
WHAT ARE THE VIEWS OF THE POLITICAL PARTIES?
Mr. John Steenhuisen, Minister of Agriculture and leader of the Democratic Alliance (DA), stated that the DA does not favour this proposed budget for 2025.
Mr. Steenhuisen, in fact, stated that the budget is actually going to harm the middle class with the proposed VAT increase and personal income tax increase.
The ANC currently has 39% votes in favour of passing the budget. They need 50% +1 to pass this budget.
Mr. Gwede Mantashe, Minister of Mineral and Petroleum and also the national chairperson of the ANC, stated that they have been engaging with the parties that are not in favour of the bill.
However, they cannot counterpose political processes against the budget as they are exchanging political issues for the budget.
A budget is for the country to work.
They will have to support the budget as it is focused on spending issues like education, health, infrastructure, and social grants.
Mr. Mmusi Maimane, leader of Build One South Africa (Bosa), stated that in his view, South Africans will, in fact, be double-taxed with VAT and Personal Income tax, both being increased.
Mr. Roland Athol Price Trollip, Leader of ActionSA, said the budget did not mention cutting off state-owned enterprises that have become redundant; there was no mention of cutting the cabinet size or eliminating corruption.
Dr. John Hlophe, the leader of the uMkhonto weSizwe party (MK), said the Minister has chosen the wrong option in their view.
Increasing VAT by any percentage is disastrous.
The Minister had a number of other options, such as increasing the wealth tax - "There is no reason why it cannot be increased. They need to capacitate SARS to be better enabled to collect revenue."
Unfortunately, the budget did not contain any budget cuts or concrete timeframes.
WHAT ARE THE PROPOSED CHANGES TO LOOK OUT FOR?
Instead of a two-percentage-point increase in the VAT rate this year, as proposed by the budget, the government wants to increase the rate of VAT by 0.5 percentage points each year over two fiscal years.
This will result in the VAT rate reaching 16% in 2026/27.
The first VAT increase will take effect on 1 May this year and the second on 1 April 2026.
Medical tax credits will not be adjusted for inflation.
They will remain at R364.00 per month for the first two beneficiaries and at R246.00 per month for the remaining beneficiaries.
Fuel levies will not increase.
This means the general fuel levy, the Road Accident Fund levy, and the customs and excise levy on petrol and diesel will not change.
These levies have not been increased since 2022.
Transfer duty on property transactions will be increasing the value bands for the duties that are paid when a property is sold.
The price brackets will be adjusted by 10% on 1 April 2025.
Transfer duty tax rates will remain unchanged.
Personal income tax - personal income taxpayers will ultimately take home less – particularly if their salary increase pushes them into a new tax bracket.
If the tax brackets had been adjusted, taxpayers would still pay more in tax, but it would be in line with their increase.
Excise duties on alcohol and tobacco will increase by 6.75% instead of 6.83%.
The duties on cigarettes, cigarette tobacco, and vaping, formally called electronic nicotine delivery systems (ENDS) and non-nicotine delivery systems (ENNDS), will increase by 4.75% instead of 4.83%.
Ad valorem excise duties on smartphones.
Budget 2.0 also retains the proposal that, from 1 April, the 9% ad valorem excise duty on smartphones will apply only to smartphones with a price of more than R2 500 at the time of export to South Africa.
No wealth tax.
The Budget does not propose introducing a “wealth tax”, despite speculation in some quarters that this could be implemented to compensate, in part, for not increasing the VAT rate by two percentage points.
Tax on foreign pensions: It is proposed that changes be made to the rules that currently exempt lump sums, pensions, and annuities received by South African residents from foreign retirement funds for previous employment outside South Africa, with amendments in the current legislative cycle.
It will not be the poor South Africans that will feel the newly placed pressure,
but rather more so the middle-class South Africans.
It is an extremely short-term view to think that an increase in VAT will account for the budget shortages in South Africa.
The public will in fact, as previously statistically proven with the last VAT increase, only end up spending less.
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