Examining the 2025 Budget Speech and the economic consequences for South Africans

THE 2025 Budget Speech, delivered by South Africa’s Finance Minister, has been met with widespread condemnation, with critics slamming it as a callous and economically destructive move that will further cripple already struggling households.

The proposed 1% VAT increase over two years, coupled with the failure to adjust personal income tax brackets for inflation, has been described as “unacceptable” and a “slap in the face” to taxpayers. Solidarity, a leading trade union, has led the charge, accusing the government of showing “no compassion whatsoever” for the people of South Africa.

The Treasury’s proposal to increase VAT by 1% has been met with fierce resistance. Theuns du Buisson, an economic researcher at the Solidarity Research Institute (SRI), minced no words in his criticism: “This increase will push struggling households to breakpoint. By having proposed it, the government is showing how it has no compassion whatsoever for the people of South Africa.” He further warned that the budget, if accepted as it stands, would cause “a larger breach of trust in the political leadership.”

Du Buisson also cast doubt on the Treasury’s revenue projections, stating that the expectation of R28 billion from the VAT increase is likely an overestimation. “In the case of the previous VAT increase in 2018, revenue from the increase was disappointing,” he said. This raises serious questions about the government’s fiscal planning and its reliance on measures that disproportionately affect the poor and middle class.

Adding insult to injury, Du Buisson highlighted the government’s failure to adjust medical aid tax credits for inflation. “It is also a slap in the face of taxpayers that tax brackets remain unadjusted, and that medical aid tax credits have not been adjusted for inflation,” he said. “This is once again taking money from the pockets of ordinary South Africans, rather than stopping wastefulness. It seems as if the Finance Minister is trying to turn the middle class into poor people as well.”

Jurgen Eckmann, a Wealth Manager at Consult by Momentum, highlighted the severe implications of the government’s failure to adjust personal income tax brackets for inflation. “While there were no overt personal income tax increases, this lack of inflationary adjustment means that South Africans will ultimately take home less—especially if their annual increase pushes them into a new tax bracket,” he said.

This stealth tax will hit middle-income earners particularly hard, effectively eroding their purchasing power and exacerbating financial strain.

Eckmann provided a stark example: “Let’s say someone earns R30 875 per month before tax. Should they receive a 7% inflationary annual increase, this will shift them into a new tax bracket. Without Treasury adjusting the brackets, this person will now pay almost R10 000 more in annual income tax. While their net salary would have increased by 5.65%, their tax bill would have jumped by 13.15%.” This glaring inequity underscores the government’s failure to protect ordinary citizens from the rising cost of living.

Eckmann also pointed out that this is the second consecutive year that tax brackets have not been adjusted for inflation, further compounding the financial burden on households. “With tax being a complex area for many individuals, it is always a good idea to chat to a qualified financial adviser who will help you navigate your tax affairs,” he said.

However, for many South Africans, the additional financial strain imposed by this budget leaves little room for such luxuries.

Nkosinathi Mahlangu, youth employment portfolio head at Momentum Group, expressed deep disappointment at the lack of meaningful measures to address youth unemployment. “The 2025 Budget Speech was a critical turning point for South Africa, but it leaves us questioning how the youth will be meaningfully included in the economy,” he said.

With more than R380 billion allocated to debt servicing, Mahlangu argued that the government had missed a vital opportunity to create sustainable jobs for young people.

“While infrastructure spending of R1 trillion is commendable, we must ensure that youth are not just passive participants,” Mahlangu said. He called for immediate upskilling initiatives and actionable plans to integrate youth into sectors such as transport and agriculture. “For example, the rail sector and the anticipated water projects, like the Mkhomazi Project in 2027, must include actionable plans for youth employment today,” he said.

However, the budget failed to deliver on these fronts, offering no dedicated funds for youth employment interventions or a clear exit plan from the SRD grant dependency.

Mahlangu also criticised the lack of support for small businesses, which are a key driver of job creation. “Small businesses are a key driver of job creation, yet there is little concrete support to help them scale,” he said. “The youth need salaries, not handouts. If we are serious about tackling youth unemployment, we need comprehensive plans, like leveraging public-private partnerships, to create sustainable and inclusive jobs, especially in the first year of this term.”

Arno Jansen van Vuuren, Managing Director at Futurewise, acknowledged some positive developments in the education sector, including the allocation of funds to retain 11 000 additional teachers and boost early childhood development (ECD) subsidies.

“Today’s budget will ensure that 11 000 additional teachers remain in classrooms, while also increasing the subsidy for young children to R24 per day,” he said. Additionally, the budget will enable ECD access for 700 000 more children, a move that Jansen van Vuuren described as “essential to building a brighter, more equitable future for our children”.

However, these gains are overshadowed by the broader economic pain inflicted by the VAT increase and unadjusted tax brackets. Van Vuuren emphasised that while the additional revenue generated from the VAT hike will benefit vital sectors like education, the overall impact on household finances cannot be ignored.

“While the VAT hike announced today is sure to dominate headlines in the coming weeks, it is important to keep in mind that the additional revenue generated will directly benefit vital sectors such as education,” he said. “However, the lack of inflationary adjustments to personal income tax brackets for the second year running will hurt consumer finances.”

The 2025 Budget Speech has been widely criticised as a missed opportunity to address South Africa’s pressing economic challenges. Instead of implementing measures to stimulate growth and create jobs, the government has chosen to burden already struggling households with higher taxes and inflationary pressures. As Du Buisson aptly put it, “This looks like a budget coming from a minister who is intent on destroying the country.”

The failure to adjust tax brackets, the lack of concrete plans for youth employment, and the reliance on regressive VAT increases paint a picture of a government out of touch with the realities faced by ordinary South Africans.

As the country grapples with rising unemployment, inequality, and poverty, this budget does little to inspire confidence in the political leadership. Instead, it reinforces the perception that the government is more interested in balancing its books on the backs of its citizens than in building a more equitable and prosperous future for all.

The 2025 Budget Speech has laid bare the government’s misplaced priorities and its failure to address the needs of its people. From the VAT increase that will crack household budgets to the lack of support for youth employment and small businesses, this budget is a stark reminder of the growing disconnect between the government and the citizens it serves.

As Du Buisson warned: “If the ANC does not resort to savings mechanisms themselves, political opponents should use the opportunity to force them to act responsibly. This is the least South Africans can expect from political parties in our Parliament.”

The time for accountability is now. South Africans deserve a government that prioritises their well-being over fiscal austerity and political expediency. This budget is not just a failure of policy; it is a failure of leadership. And until that changes, the prospects for a brighter future remain bleak.