Godongwana tables 2025 revised budget, introduces fuel tax increases

MOTORISTS will have to bear the brunt of the withdrawn VAT hike, as Finance Minister Enoch Godongwana announced inflationary increases to petrol and diesel prices in order to address the gap left by the abandoned VAT increases.

“The reality, however, is that the decision to do away with the VAT increase, without a viable alternative source of revenue, significantly reduced our ability to fund additional government programmes and projects to the extent we had deemed necessary,” he said.

The Minister said the budget supported sustainable finances, the social wage and investments in economic growth.

“This is not an austerity budget,” he said.

Godongwana also said the budget was redistributive because it directed 61 cents of every rand of consolidated and non-interest expenditure towards the social wage.

“This is the money that will be spent to fund free basic services like electricity, water, education, healthcare, affordable housing as well as social grants for those in need. This budget invests over R1 trillion in critical infrastructure to lift economic growth prospects and improve access to basic services.”

He noted that the budget was crafted in a manner that did not compromise the fiscal strategy of sustainable public finances.

“We have achieved this difficult balance by reducing additional spending over the medium term by R68 billion. These reductions are primarily aimed at provisional allocations not yet assigned to votes. Simply put, this means baseline allocations across all spheres of government remain largely unchanged.”

Godongwana said since the VAT hike has been scratched, the expansion of zero-rated food items to cushion poorer households from an increase, is also scrapped.

“Compared to the March estimates, tax revenue projections have been revised down by R61.9 billion over the next three years. This reflects the reversal of VAT increases and the much weaker economic outlook,” he said.

He announced an inflation-linked increase to the general fuel levy.

“For the 2025/26 fiscal year, this is the only new tax proposal that I am announcing… unfortunately, this tax measure alone will not close the fiscal gap over the medium term.”

The Minister said the 2026 Budget will need to propose tax measures aimed at raising R20 billion, and SARS has been allocated an additional R7.5 billion to increase its' effectiveness in collecting more revenue.

“SARS has indicated that this could raise between R20 billion to R50 billion in additional revenue per year,” he said.

Godongwana also called on taxpayers to honour their tax obligations and thanked those who continue to pay their taxes.

In an effort to prioritise high-impact expenditure, the National Treasury has undertaken spending reviews, looking at more than R300 billion in government expenditure since 2013.

Godongwana said they have found potential savings of R37.5 billion over time through improved oversight and operational changes.

The Minister also said underperforming programmes will be closed when the 2026 Budget process gets underway.

“New reforms will target infrastructure planning and implementation across provinces and municipalities. A data-driven approach to detecting payroll irregularities will replace the current, more costly method,” he said, adding that ghost employees and other anomalies across departments will be identified.”

Cape Times