The 2025 Budget Speech introduces a range of measures that will impact individuals, businesses, particularly small and medium-sized enterprises (SMEs), providing both challenges and opportunities. Below are the key provisions and their economic implications:
- Economic Outlook: Real economic growth is forecast to increase to 1.9% in 2025, and is projected to average 1.8% from 2025 to 2027. This growth is supported by improved investor confidence, stable electricity supply, lower interest rates, and a declining risk premium. The continued implementation of structural reforms is essential to accelerate growth.
- Budget Framework: The fiscal strategy blends critical spending measures with revenue increases. The consolidated budget deficit is expected to narrow from 5% of GDP in 2024/25 to 3.5% of GDP in 2027/28. Government will reach the important milestone to stabilise debt next year through the strengthening primary surplus.
- Spending Plans: Consolidated government spending increases at an annual average of 5.6%, from R2.4 trillion in 2024/25 to R2.83 trillion in 2027/28. Over the medium term, economic development is the fastest-growing function at an annual average rate of 8.1%, driven by higher allocations to infrastructure projects. Spending is highly redistributive, with the social wage making up 61% of total consolidated non-interest spending over the next three years. The 2025 Budget funds spending pressures of R232.6 billion over the medium-term expenditure framework (MTEF) period, including provisional allocations for frontline service delivery departments amounting to R70.7 billion. Additional funding of R46.7 billion is made available for infrastructure investments and R23.4 billion is made available for the 2025 public-service wage agreement.
- Tax Proposals: Tax policy proposals are designed to raise R28 billion in additional revenue in 2025/26 and R14.5 billion in 2026/27. Government proposes to increase the value-added tax (VAT) rate by 0.5 percentage points in 2025/26 and by 0.5 percentage points in 2026/27. Personal income tax brackets and rebates are not adjusted for inflation in 2025/26. To provide relief to lower-income households, government proposes additional VAT zero rating of essential food items and no changes to the fuel levy.
- Priorities: Government's medium-term strategy is anchored by four priorities: maintaining macroeconomic stability; implementing structural reforms; building state capability; and supporting growth-enhancing public infrastructure investment.
- Infrastructure Investment: Over the next three years, an estimated R1.03 trillion will be spent on public infrastructure projects by state-owned companies, other public entities, and national, provincial and local government. The 2025 Budget adds R46.7 billion in funding for infrastructure projects over the next three years.
- Fiscal Policy: Government's fiscal strategy is on track to strengthen the public finances. The consolidated budget deficit is projected to narrow from 5% of GDP in 2024/25 to 3.5% of GDP in 2027/28. The primary budget surplus will enable government to stabilise debt by the end of 2025/26.
- Increased Funding for SARS: In an effort to strengthen regulatory compliance, funding to SARS will increase, enhancing its ability to enforce tax regulations and improve compliance within the business sector.
For businesses, particularly those operating in infrastructure, energy, and regulated industries, the increased infrastructure investment and stable fiscal policy signal a supportive environment for growth. However, businesses must prepare for the proposed VAT increases and the ongoing need to comply with SARS regulations.
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