The Key Highlights:

• The VAT rate will increase by half a percentage point in 2025, and again in 2026. However, if the government raises additional revenue through other measures, it may reconsider the second-year increase.
• To support the vulnerable households, the basket of zero-rated food will be expanded, and the fuel levy will remain unchanged for another year
• There will be no adjustment to tax brackets or tax rebates this year
• The consolidated budget deficit is expected to narrow to 3.5% of GDP by 2027/28 from 5% in 2024/25. A budget primary surplus of 0.9% is projected for 2026/7.
• Government debt stabilises at 76.2% of GDP in 2025/26, albeit higher than 75.5% projected in the MTBPS. Importantly, debt service cost as a percentage of revenue stabilises in 2025/26. However, debt service cost is high, it now absorbs 22c for every R1 of revenue raised – which is more than what is spent on health, basic education or policing.
• Eskom debt takeover of R70 billion under the debt relief arrangement will be replaced by two advances amounting to R50 billion as the utility is in a better financial position than previous years. This will include R40 billion in 2025/26 and R10 billion in 2028/29 to redeem maturing debts.
• The fastest-growing area of spending will be infrastructure, in which over R1 trillion will be spent in the next three years on transport and logistics, energy, water, and sanitation
• Public-private partnership regulatory framework amendments effective from 1 June 2025. These are expected to reduce complexity and create capacity to support and manage partnerships, which will benefit the economy. A credit guarantee vehicle to mobilise private capital by de-risking projects will be launched in 2026.
• Social grants will increase: The old age and disability grants will rise in April by R130 to R2 315; the child support grant by R30 to R560 per month; and the foster care grant by R70 to R1 250. The Social Relief of Distress Grant will be extended until March 2026.