Godongwana
By Thabo Mosia
Minister of Finance, Enoch Godongwana, will this afternoon return to Parliament to re-table the 2025 Budget Review. This decision follows the Minister’s recent announcement and subsequent request to the Speaker of the National Assembly to maintain the Value-Added Tax rate at its current level of 15 percent, reversing the previously proposed 0.5 percentage point increase presented in the 12 March budget.
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A Historic Third Attempt at the 2025 Budget
This afternoon’s presentation marks an unprecedented third attempt by Minister Godongwana to secure parliamentary approval for the national budget. The initial proposal in February, which included a two-percentage-point VAT increase, was withdrawn due to strong opposition from coalition partners, particularly the Democratic Alliance (DA).
A revised proposal in March, suggesting a phased 0.5 percentage point increase, also faced legal challenges and was ultimately retracted. The DA’s successful court challenge led to the reversal of the VAT hike, maintaining the rate at 15 percent.
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Fiscal Implications of the VAT Reversal
The decision to maintain the VAT rate has created a significant revenue shortfall of approximately R75 billion over the medium term. To address this gap, the National Treasury has developed a new fiscal framework focusing on debt stabilisation and sustainable public finances.
This includes revising economic assumptions, updating fiscal projections, recalculating revenue expectations, determining appropriate borrowing strategies, and consolidating these elements into a coherent fiscal plan.
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Strategies to Bridge the Revenue Gap
To compensate for the revenue shortfall, the Treasury is considering a combination of spending cuts and enhanced revenue collection. The South African Revenue Service (SARS) reported an 8.8 billion rand windfall for the 2024/25 fiscal year, indicating stronger-than-expected tax revenues.
Additionally, the government may tap into the 390 billion rand Gold and Foreign Exchange Contingency Reserve Account to avoid further borrowing. This approach aims to limit borrowing and reduce debt liabilities, which is crucial for the struggling economy.
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Political Consensus and Coalition Dynamics
The revised budget is expected to have the full support of the Government of National Unity (GNU), comprising the African National Congress (ANC) and the Democratic Alliance (DA). The previous budget proposals led to conflicts between these two major parties, with the DA opposing the VAT increase and successfully challenging it in court.
The ANC had to enlist support from parties outside the GNU to pass the budget once the DA indicated it would be voting against it. However, recent engagements have led to a consensus on budget differences.
DA spokesperson on Finance, Mark Burke, stated, “It’s been a positive engagement on the budget. We hope that what we will see on this budget is a focus on infrastructure investment and we will not be funding that through tax increases, be that in increases to Value Added Tax (VAT), direct increase in personal or corporate tax.” 
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Economic Outlook and Debt Stabilisation
The National Treasury projects a main budget primary surplus of 0.5 percent of GDP for the current year, increasing to 0.9 percent in 2025/26. This surplus is crucial for stabilising debt as a share of GDP. However, economists anticipate an increased budget deficit forecast of 4.70 percent of GDP for the 2025/26 fiscal year, higher than previous projections.
This reflects continued challenges in boosting tax revenue amid weak economic growth, which is forecasted at just 1.5 percent for 2025.
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Public Services and Social Grants
Despite the fiscal constraints, the government aims to protect vital services such as education, health, and social grants. The revised budget includes increased allocations to these sectors, ensuring that essential services are maintained. Social grants have been increased, with old age and disability grants raised to R2,315 and child support grants to R560.  
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Conclusion
Minister Godongwana’s presentation of the revised 2025 Budget is a critical step in addressing South Africa’s fiscal challenges while maintaining political stability within the coalition government. The budget aims to balance the need for fiscal consolidation with the protection of essential public services, ensuring sustainable economic growth.
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Where to Watch the Budget Speech
The 2025 Budget Speech will be delivered during the National Assembly plenary at the Cape Town International Convention Centre at 2pm. It will be broadcast live on Parliament TV (DSTV Channel 408) and livestreamed on Parliament’s website and social media platforms. 
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