Godongwana tables 2025 revised budget, introduces fuel tax increases

Finance Minister Enoch Godongwana unveiled the 2025 Budget during a joint sitting of Parliament on Wednesday, announcing inflationary increases to petrol and diesel prices in order to address the gap left by the abandoned VAT hike.

Delivering his Budget speech during the joint sitting of Parliament, Godongwana said the VAT (Value Added Tax)will remain at 15% as their commitment to listening to South Africans.

“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 manner that it 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 he thanked those who continue to pay their taxes.

“As a government we know that we must earn the taxpayers’ trust every day, by spending public money with care and ensuring that every rand collected is pent on its intended purpose. We recognise the urgent need to do more to achieve this goal,” he said.

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.

He noted that President Cyril Ramaphosa has undertaken to establish a committee to identify wasteful, inefficient and underperforming programmes.

“I call on Ministers, MECs, directors-general, heads of departments and every official responsible for public funds to embrace these efforts and play their part.”

In terms of allocations, Godongwana said R6.69 trillion is allocated for non-interest spending over the medium terms.

“There is also proposed additional spending of R180.1 billion. This is lower than the R232.6 billion proposed during the March Budget.”

A total of R9.5 billion is allocated for employment of more teachers, R10 billion for early childhood education, R20.8 billion for employment of 800 post-community service doctors, among others.

Godongwana announced that R1.4 billion is allocated to support the preparation for the 2026 local government elections.

“R885 million of the allocation is for the Independent Electoral Commission and R550m for the SAPS and SANDF to maintain public order.

“This investment contributes to upholding the democratic processes and ensuring that every South Africans can exercise their right to vote in a safe and secure environment."

Godongwana indicated that the 2025 Budget contained provisional allocations for early retirement, allocations for passenger Rail Agency of South Africa (Prasa) and municipal trading entity reform.

“The spending choices we are proposing today demonstrate the government’s determination to bolster the state capability needed to deliver quality, reliable and sustainable core services,” he said.

However, Godongwana said there were long-standing spending pressures that cannot be funded with the current envelope.

These include the withdrawal of the President’s emergency Plan for Aids Relief funding, infrastructure projects in the budget facility and Prasa’s rolling stock fleet renewal programme, strengthening population changes in equitable shares allocations to provinces, political party funding and the strengthening the capabilities of the Office of the Chief Justice and Statistics South Africa.

mayibongwe.maqhina@inl.co.za