CAPE TOWN, May 21 (Xinhua) -- South African Finance Minister Enoch Godongwana re-tabled the 2025 Budget before the parliament on Wednesday, excluding the contentious value-added tax (VAT) increase and prioritizing social spending and economic growth while aiming to rein in public debt.
This came after the budget was delayed from its original February date due to internal disputes over the proposed VAT hike. On March 12, Godongwana presented a budget review proposing a phased increase of 0.5 percentage points in 2025/26 and another 0.5 in 2026/27, raising the VAT rate to 16 percent by the 2026/27 financial year.
Delivering his third version of the 2025 budget speech during the National Assembly plenary on Wednesday afternoon, the finance minister outlined several key points revised in the budget, including the country's economic status, growth projections, substantial debt servicing costs, the withdrawal of the contentious VAT increases, and the continuation of the social relief grant.
"We now have clarity: VAT will remain at 15 percent. This decision demonstrates our commitment to listening to South Africans and all the political parties represented in this House," he said.
However, to balance the withdrawal of the VAT hike, Godongwana said fuel taxes would be adjusted for inflation.
He noted that South Africa's economy will likely expand by 1.4 percent this year, lower than the 1.9 percent projected in March, and then rise moderately to 1.6 percent in 2026 and 1.8 percent in 2027.
In his speech, Godongwana said the budget still aims to grow the country's income faster than its spending, with government debt projected to stabilize at 77.4 percent of the gross domestic product, up from the 76.2 percent projected in March.
According to him, key spending measures that will be implemented going forward are diverse and take into account changes in the global economy.
Infrastructure investment remains a key component in driving economic growth, and the government has maintained its 1 trillion rand (about 55.8 billion U.S. dollars) allocation for infrastructure spending over three years to support this growth, he noted. Meanwhile, increases to all social grants will not be affected by the re-tabled budget.
"This budget supports economic activity while raising future economic prospects, directs spending toward the social wage, and invests in state capability and critical infrastructure, all the while promoting fiscal sustainability," Godongwana said.
