Albert Botha
There has been a raft of changes to the proposed budget from its previous iteration. The revised 2025 Budget reflects a delicate balancing act between fiscal consolidation, socio-economic priorities and political power balances, says Albert Botha, head of Fixed Income at Ashburton Investments.
The important announcements in summary:
On the revenue side, tax increases have been reduced and spread out, making them less visible but still impactful. Instead of a 2% VAT hike, the rate will rise by 0.5% per year over the next two years, raising R11 billion in FY25/26. Inflation adjustments have been frozen, with no inflationary relief on personal income tax brackets, rebates or medical tax credits, expected to raise R18 billion in FY25/26. Similarly, medical tax credits will not receive inflationary adjustments, contributing an additional R1.5bn annually to revenue. The fuel levy is frozen, while alcohol and tobacco taxes will increase.
On expenditure, government has trimmed spending by R9bn, R10bn, and R10bn over the next three fiscal years, since the February draft of the Budget, largely due to lower adjustments to social grants and reduced provisional expenses in Home Affairs. Social grant allocations have been cut by R15 billion, while R27 billion is earmarked for public sector wage increases and R11 billion for an early retirement programme. Infrastructure investment remains steady at R47 billion, focused on PRASA and municipal projects.
With parliamentary approval still pending, the budget’s effectiveness will depend on execution and political stability in the coming months.
What it all means:
“The revised budget still needs to be approved by Parliament, with debates expected in the coming weeks. The budget reflects a delicate balance between fiscal consolidation and addressing socio-economic needs in the challenging context of a fractured political landscape.”
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