South Africa’s Finance Minister, Enoch Godongwana, announced that a revised national budget will be tabled in Parliament on May 21, 2025, with a continued focus on stabilizing the country’s public debt amid political and economic challenges. The revised budget will adjust revenue, expenditure, and growth projections following the withdrawal of a controversial value-added tax (VAT) increase that had sparked significant divisions within the coalition government.
The initial 2025 budget, presented in March, proposed raising VAT from 15% to 17%, a move that faced strong opposition from coalition partners and the public, leading to legal challenges by opposition parties such as the Democratic Alliance. After months of political wrangling and investor anxiety that weakened the rand, the government decided to keep VAT unchanged at 15%, reflecting responsiveness to public sentiment and political realities.
Minister Godongwana emphasized the importance of broad consultations with all coalition parties before finalizing the revised budget, acknowledging the complexities of governing in a coalition setup. He admitted that the budget process so far had been “chaotic” but reaffirmed the government’s commitment to fiscal consolidation and prudent management of public finances. The Treasury’s statement highlighted that stabilizing debt remains a “vital component in enhancing our public finances,” signaling that controlling the budget deficit and managing borrowing costs will be central priorities. South Africa faces a budget deficit projected at around 5% of GDP, with expectations of gradual improvement over the medium term.
Social spending, especially on grants and essential services like education and health, is expected to be protected despite fiscal pressures. The government also plans to continue supporting economic growth initiatives and infrastructure development to stimulate recovery in Africa’s largest economy, which is forecasted to grow modestly around 1.5% in 2025.
The upcoming budget will be critical in restoring investor confidence and stabilizing the rand, which has been volatile due to political uncertainty and economic concerns. Parliament has expressed readiness to process and adopt the revised budget, marking a key step toward fiscal stability and economic resilience for South Africa.