A comprehensive analysis of the 2025 Budget Speech, I first compare it with last year’s commitments and then I provide a professional critique from a perspective of a Senior Tax Practitioner and Attorney of more than 20 years at Maluks Attorneys, Sandton, Johannesburg.
Comparison with the 2024 Budget Speech Commitments
1. Macroeconomic Stability and Growth
• 2024 Commitment: Last year’s budget focused on fiscal consolidation, debt stabilization, and the pursuit of structural reforms under Operation Vulindlela (OV).
• 2025 Reality: The government remains committed to fiscal stability but has been forced to increase VAT by 1% (to 16%) over two years, citing the need to raise revenue for critical public services. Debt is expected to stabilize at 76.2% of GDP, an improvement from prior projections.
2. Taxation & Revenue Mobilization
• 2024 Commitment: No explicit tax hikes were promised, but there was a focus on strengthening SARS for better compliance.
• 2025 Reality: A VAT increase, combined with the decision not to adjust personal income tax brackets for inflation, effectively increases the tax burden on individuals. The government also announced R3.5 billion for SARS enforcement, signalling an aggressive push toward compliance and debt collection.
3. Infrastructure Investment
• 2024 Commitment: The government pledged to accelerate infrastructure projects and deepen public-private partnerships (PPPs).
• 2025 Reality: Over R1 trillion in infrastructure spending is planned, but new PPP regulations (effective June 2025) were introduced to streamline private-sector participation. However, Transnet’s financial distress and the logistics crisis remain unresolved, threatening infrastructure efficiency.
4. Energy Sector
• 2024 Commitment: The Eskom Debt Relief Plan was introduced, and private sector participation in energy generation was encouraged.
• 2025 Reality: The final phase of Eskom’s debt relief has been scaled down, saving the government R20 billion, but concerns remain about Eskom’s operational sustainability.
5. Social Welfare & Cost of Living
• 2024 Commitment: The government emphasized supporting vulnerable households but did not expand VAT exemptions.
• 2025 Reality: The government expanded the VAT zero-rated basket (adding canned vegetables, dairy liquid blends, and organ meats) while freezing fuel levy hikes for another year.
6. Public Sector Wage Bill
• 2024 Commitment: Strict control over the public sector wage bill was emphasized.
• 2025 Reality: Despite efforts to contain costs, a three-year wage agreement has been reached, increasing spending by R7.3 billion in 2025/26 and R8.2 billion in 2027/28.
Professional Analysis of the 2025 Budget Speech
By Joseph Maluleke – Senior Tax Practitioner & Attorney | Maluks Attorneys, Sandton
The 2025 Budget Speech reflects a delicate balancing act between fiscal consolidation and socio-economic demands. While National Treasury’s commitment to macroeconomic stability, structural reforms, and infrastructure investment remains commendable, several concerns arise from both a tax policy and legal compliance perspective.
1. Increased VAT: A Regressive Tax Choice
The decision to raise VAT to 16% by 2026/27 is a clear indication of government’s fiscal distress. VAT, by nature, is regressive, disproportionately affecting low-income households. While the expansion of the VAT zero-rated basket mitigates some impact, the relief is marginal compared to the broad-based increase in consumption tax.
From a tax practitioner’s standpoint, this increase:
• Could dampen consumer spending, affecting economic growth.
• Places additional pressure on businesses, particularly in retail and manufacturing, where margins are already squeezed by logistics and energy constraints.
• Opens the door for further VAT fraud, as businesses may seek ways to manipulate VAT refunds.
2. The Impact of ‘Bracket Creep’
By failing to adjust personal income tax brackets, rebates, and medical tax credits for inflation, the government effectively increases the tax burden on middle-income earners. This silent tax hike is concerning because:
• It reduces disposable income, further weakening demand.
• It does not incentivize compliance; instead, it may drive informal income activities to avoid taxation.
• It could be perceived as penalizing productivity, discouraging highly skilled professionals from remaining in South Africa.
3. SARS Enforcement & Compliance Risks
The increased allocation of R3.5 billion to SARS and its intensified focus on unregistered taxpayers signals a more aggressive tax collection approach. However:
• This does not address the fundamental problem—the shrinking tax base.
• SARS’ focus on undisputed tax debts and non-filers must be balanced against ensuring business continuity, particularly for struggling enterprises.
• A compliance crackdown without parallel economic stimulation measures could be counterproductive, leading to capital flight and tax avoidance strategies.
4. Public Debt & Fiscal Sustainability
The government claims that debt is stabilizing at 76.2% of GDP, yet debt-service costs will still consume 22 cents of every rand raised. This is more than what South Africa spends on health, education, or policing.
From a legal and policy standpoint, this raises red flags:
• Is the government over-reliant on new taxation rather than deep expenditure reforms?
• The failure to cut wasteful expenditure, particularly in state-owned enterprises (SOEs) and government departments, suggests that taxpayers are being asked to fund inefficiencies rather than real economic growth.
5. Infrastructure Investment: Too Late for Economic Growth?
While R1 trillion in infrastructure investment over the next three years is welcome, concerns persist:
• Will these projects be efficiently executed? The weak governance of PRASA, Transnet, and Eskom suggests execution risks.
• Private sector confidence remains low. The fact that the PPP framework was only finalized now, despite years of pledges, signals slow policymaking.
• No clear turnaround strategy for SOEs. Without addressing the root cause of inefficiencies in Transnet, Eskom, and PRASA, these allocations risk becoming another cycle of bailouts.
6. Missed Opportunities for Broader Tax Reform
A critical missed opportunity in the budget was corporate tax reform aimed at stimulating growth. The focus remained on tax increases rather than:
• Expanding incentives for foreign direct investment (FDI) to attract much-needed capital.
• Implementing tax relief for SMEs, which are the backbone of job creation.
• Offering targeted incentives for priority sectors, such as renewable energy, mining, and industrialization.
Final View: A Budget Focused on Short-Term Revenue, Lacking Long-Term Growth Vision
From the standpoint of a seasoned tax attorney and corporate strategist, the 2025 Budget Speech reflects fiscal desperation rather than economic transformation. While there are necessary elements—such as infrastructure investment and SARS enforcement—the reliance on tax increases rather than genuine economic expansion strategies is a concern.
The government has chosen taxation over structural economic reform, a decision that may slow down investment, weaken consumer demand, and potentially increase non-compliance risks.
Key Recommendations:
1. Revisit VAT Hikes – Implement broader corporate tax incentives to compensate for the tax burden on consumers.
2. Prioritize SOE Governance Over Bailouts – Without root-and-branch reforms at Eskom, Transnet, and PRASA, additional fiscal support is a challenge.
3. Expand the Tax Base Through Economic Growth, Not Just Enforcement – SARS cannot tax its way to prosperity; the economy needs stimulus measures to attract investment and job creation.
4. Boost Confidence in PPPs – Private sector participation remains weak; investor-friendly policies are urgently needed.
Conclusion
The 2025 Budget is pragmatic but insufficiently bold. South Africa needs a pro-growth, pro-investment budget, not just a revenue-raising one. Without a shift in approach, fiscal constraints and stagnation will persist—posing a long-term risk to South Africa’s economic future.
About the Author
*Joseph Maluleke, is a specialist tax practitioner and attorney at Maluks Attorneys in Sandton, Johannesburg with more than 20 years of experience in tax law, corporate finance strategy, he provides expert advisory services to business and individuals navigating South Africa’s complex fiscal landscape.
