Review of the 2025 Budget Speech

Written on 13/03/2025
Profmark Team


The 2025 Budget Speech addressed the economic stagnation of the past decade, with GDP growth averaging less than 2%. In 2024, the economy grew by only 0.6%, and medium-term projections estimate an average growth of 1.8%. The speech emphasized the need for faster, inclusive economic growth to meet developmental goals.

The budget aims to achieve macroeconomic stability through sound fiscal policy, structural reforms, and infrastructure investment. Key fiscal targets include achieving a budget primary surplus of 0.5% of GDP in 2024/25, growing to 0.9% in 2025/26, stabilizing government debt at 76.2% of GDP by 2025/26, and reducing the consolidated budget deficit to 3.5% by 2027/28.

The final phase of Eskom's debt relief package has been simplified, resulting in a saving of about R20 billion for the government. This contributes to the improved fiscal position and supports the goal of stabilizing debt service costs.

The budget proposes a growth strategy anchored on four pillars: maintaining macroeconomic stability, implementing structural reforms, improving state capability, and accelerating infrastructure investment. Public infrastructure spending over the next three years will exceed R1 trillion, focusing on transport and logistics, energy infrastructure, and water and sanitation.

To address spending pressures in health, education, transport, and security, the government proposes increasing the VAT rate by 1 percentage point over two years, reaching 16% by 2026/27, and no inflationary adjustments to personal income tax brackets, rebates, and medical tax credits. These measures are expected to raise R28 billion in 2025/26 and R14.5 billion in 2026/27.

The budget includes significant allocations for social grants, with increases to the old age and disability grants, Child Support Grant, and foster care grant. The COVID-19 Social Relief of Distress (SRD) grant will be extended by a year, with R35.2 billion allocated for this purpose.

A three-year wage agreement has been reached, costing an additional R7.3 billion in 2025/26, R7.8 billion in 2026/27, and R8.2 billion in 2027/28. An early retirement initiative aims to attract younger employees into the public service, with expected savings averaging R7.1 billion per year.

The 2025 Budget Speech reflects the government's commitment to fostering economic growth, improving public services, and reducing inequality through targeted fiscal measures and strategic investments. The proposed budget aims to balance fiscal discipline with the need to address pressing social and developmental priorities, ensuring a sustainable and prosperous future for South Africa.


DISCLAIMER: The material and information contained in this article is for general information purposes only. You should not rely upon the material or information in this article as the basis for making any business, legal or other decisions.