2025 Budget: Raising Revenue, Managing Debt – But Will It Deliver?
The much-anticipated 2025 Budget, originally scheduled for 19 February, was postponed amid intense debate over the proposed VAT hike. Now, with the National Treasury lifting the embargo on budget documents, South Africans can finally see the government’s plans to stabilise public finances and stimulate economic growth. However, concerns linger over whether these measures will truly deliver on their promises. In this analysis, we unpack the key budget proposals and offer CIBA’s expert perspective on their potential impact.
The VAT Increase – A Necessary Evil?
What’s Changing?
From 1 April 2025, South Africa’s VAT rate is proposed to rise from 15% to 17%, aiming to generate R58 billion in additional revenue. To offset this burden on consumers, the government is expanding the list of VAT zero-rated food items to include tinned vegetables, dairy liquid blends, and certain meats.
CIBA’s Comment
The consequences of this VAT hike could be significant. When South Africa increased VAT from 14% to 15% in 2018, consumer spending contracted, inflationary pressures intensified, and economic growth slowed. According to research from the South African Reserve Bank, the 2018 VAT increase contributed to a 0.3% decline in GDP growth in its first year of implementation. The knock-on effect of higher VAT is that businesses, particularly small enterprises, struggle to maintain profit margins as consumers tighten their spending.
While VAT is a more stable revenue source than corporate or personal income tax, it increases the cost of living for households, especially those in lower-income brackets, who spend a larger portion of their income on essentials.
CIBA warns that without robust economic growth policies, the higher VAT rate will further depress consumer demand, making it harder for businesses to expand and create jobs. Instead of relying on VAT, the government should prioritize structural reforms, eliminate inefficiencies in public spending, and recover lost revenue from corruption and tax evasion.
Tax Changes – More Pressure on High Earners
What’s Changing?
Personal income tax brackets have been adjusted slightly for inflation, but top earners will continue to be taxed at 45%.
No inflationary adjustment to medical tax credits.
Excise duties on alcohol and tobacco will increase above inflation.
CIBA’s Comment
The decision not to adjust medical tax credits for inflation places an additional burden on middle-income earners. A more strategic approach to tax reform should include measures to incentivise investment and job creation, rather than over-relying on a narrow tax base.
Social Grants and Public Spending – A Mixed Bag
What’s Changing?
The old-age, disability, and care dependency grants will increase to R2,335 per month.
The child support grant rises to R580.
An additional R23.3 billion is allocated to social grants.
R10 billion has been set aside to expand Early Childhood Development (ECD) services.
CIBA’s Comment
Social grants play a crucial role in poverty alleviation, but their sustainability depends on a thriving economy. Without robust economic growth, maintaining these grants will become increasingly challenging. Government should prioritise job creation through SME development, fostering long-term economic self-sufficiency rather than deepening reliance on grants.
Infrastructure – A Bold Promise
What’s Changing?
R1.03 trillion will be allocated over three years to transport, energy, and water projects.
A new centralised framework under National Treasury will oversee infrastructure investments.
Public-private partnerships (PPPs) have been streamlined to reduce approval bottlenecks.
CIBA’s Comment
Infrastructure investment is key to long-term economic growth, but execution remains a major concern. Past projects have been plagued by inefficiencies and corruption. Government must ensure that these funds are effectively managed, with clear accountability mechanisms in place.
SOE Reforms – Can They Deliver?
What’s Changing?
Eskom’s debt relief will be reduced from R70 billion to R50 billion.
Transnet will receive additional funding to improve rail and port efficiency.
The government will introduce private-sector participation in key logistics networks.
CIBA’s Comment
SOEs continue to drain public finances. CIBA supports private-sector involvement in SOE operations but urges the government to prioritize governance reforms to ensure efficiency and cost-effectiveness.
The Growing Debt Burden – Sustainable or Not?
What’s Changing?
Government debt will stabilize at 76.1% of GDP.
Debt-service costs will consume 22 cents of every rand of revenue.
The budget deficit will narrow from 5% to 3.4% of GDP by 2027/28.
CIBA’s Comment
South Africa’s debt remains a ticking time bomb. While the government is taking steps to manage it, more aggressive measures—such as recovering the estimated R500 billion lost to corruption—are needed. Fiscal consolidation should be paired with economic reforms that promote sustainable revenue growth.
CIBA’s Recommendations
CIBA urges the government to shift its focus from raising taxes and borrowing to improving financial efficiency, governance, and economic expansion. To achieve this, CIBA recommends:
Recovering lost funds: Government must take aggressive action to recover the estimated R500 billion lost to state capture through legal investigations, asset seizures, and global cooperation.
Fixing Eskom and Transnet: Addressing inefficiencies in these key SOEs will unlock trade, reduce business costs, and boost investor confidence.
Enhancing business & tourism safety: South Africa's high crime rate deters investors and tourists. Strengthening law enforcement and reducing corruption will attract much-needed capital and economic activity.
Investing in infrastructure & jobs: Rather than tax hikes, a large-scale infrastructure development plan—similar to China's—could stimulate employment and long-term growth.
Improving tax collection efficiency: SARS estimates R800 billion in unpaid taxes. Strengthening tax compliance measures can raise state revenue without further burdening taxpayers.
In Summary: A Step Forward or a Stumble?
The 2025 Budget presents a bold plan to stabilise public finances while addressing social and economic priorities. However, its success hinges on effective implementation, improved governance, and a commitment to long-term economic growth rather than short-term revenue collection. CIBA will continue to monitor developments and advocate for solutions that benefit both businesses and taxpayers. Read more of our thoughts on the CIBA Blogs!
Download the 2025 Budget Documents
These documents are now held over to 12 March 2025 and have not yet been debated or adopted by Parliament:
2025 Tax Budget - SARS Pocket Guide
2025 Tax Budget - Budget Presentation
2025 Tax Budget - Peoples Guide
2025 Tax Budget - Budget Review
2025 Tax Budget - Budget Highlights
2025 Tax Budget - Minister Speech
Join Us at CIBA’s Budget Breakfast on for In-Depth Analysis and Expert Insights!
To help you navigate the uncertainty surrounding the 2025 Budget, CIBA will host its own Budget Breakfast on 18 March 2025.
This event will provide:
Expert analysis of the final budget, including any last-minute amendments.
Insights on how the changes will impact tax practitioners, businesses, and individuals.
A platform to engage with leading tax experts and policymakers.
Why This Matters
The 2025 Budget Debate is more than just numbers—it’s about the future of South Africa’s economy. The postponement has created uncertainty, but understanding the proposed changes and how they impact you is more important than ever. CIBA remains committed to keeping its members informed and advocating for a fair, efficient, and growth-focused economic strategy.
Join us at the CIBA Budget Breakfast on 18 March 2025 to get the latest insights and expert analysis on the 2025 Budget and what it means for you.
South Africa must build, not burden. Let’s face the future with knowledge and confidence.
