The postponement of the national budget, initially scheduled for Wednesday, 19 February 2025, has triggered widespread political debate and discussions on the country’s economic future.

President Cyril Ramaphosa has assured South Africans that the delay is a necessary step to refine the budget, ensuring it protects vulnerable citizens while laying a foundation for economic growth.

Ramaphosa was at pains to explain that while there were disagreements, the decision to delay the budget was ultimately reached through consensus within the Government of National Unity (GNU). He emphasised that the government must balance economic growth with the realities of a constrained fiscal environment.

“We are called upon as the national leadership to pursue all initiatives aimed at growth in order for us to increase employment and alleviate the effects of poverty,” the President stated. “We are working as partners to ensure that the Budget is one that works for individuals and investors alike.”

However, parties in the GNU are claiming victory, saying they prevented a staggering 2% VAT increase.

The DA claims its strong opposition to the ANC’s proposal stopped a measure that would have further burdened citizens amid a cost-of-living crisis.

DA leader John Steenhuisen blamed Finance Minister Enoch Godongwana for failing to engage with alternative proposals put forward by opposition parties.

“Following our defeats of the ANC’s plan to hike VAT, we will now fight with the same vigour to introduce a new budget that is anchored in growing the economy, rather than increasing taxes or debt.”

Steenhuisen sees this as a landmark moment within the GNU, stating that “for the first time ever, the ANC was prevented from tabling an anti-growth budget.”

The party is now advocating for what it calls a “GNU growth budget” that prioritises economic expansion over increased taxation.

The GOOD Party, a coalition partner in the GNU, has also pointed to a lack of sufficient consultation before the budget was initially presented.

The party argued that budgetary disagreements are normal in coalition governments and should be seen as a point of leverage rather than division.

The postponement, according to GOOD secretary-general Brett Herron, was a collective decision aimed at avoiding a budget that places undue financial strain on South Africans without considering alternative revenue options.

“The GNU has to prioritise both national economic growth and reducing inequality, widespread poverty, and indignity.”

Cape Town Mayor Geordin Hill-Lewis has welcomed the budget’s postponement, specifically due to opposition to a proposed 2% Value Added Tax (VAT) hike.

He described the delay as a victory for lower-income households, which would have been hit hardest by increased costs of food and essential goods.

“Lower-income households in Cape Town – and nationally – cannot be burdened by a 2% VAT hike that will skyrocket the cost of food and other essentials,” said Mayor Hill-Lewis.

“There is more than enough waste and excess that can be cut in national government, and we are absolutely opposed to the Finance Minister’s proposed tax hike.”

The mayor also called for increased funding for cities to deliver affordable housing, in line with President Ramaphosa’s State of the Nation Address (SONA) commitments.

Additionally, he urged the national government to ensure that Cape Town receives its fair equitable share of resources, given that updated census data suggests it is on the verge of surpassing Johannesburg as South Africa’s most populous city.

The revised budget, which is due to be tabled on 12 March 2025,  will be closely scrutinised by both political leaders and citizens, as the country seeks a financial roadmap that fosters sustainable growth while addressing deep-seated socio-economic challenges.

The Budget that would have been

The 2025 Budget may have been postponed until 12 March, but the Treasury has given the media permission to report on the details that would have been contained in 19 February’s budget. However, the Treasury has said it will not be drawn on whether certain aspects will be retained in the revised budget.

Key Tax Changes from the Now-Defunct Budget:

VAT Increase (R58 billion):

• VAT would have risen from 15% to 17%, impacting middle- and upper-income households the most.
• Electricity costs would have thus risen by 14.6% for Eskom customers due to a simultaneous 12.6% Eskom increase.
• Households earning R500,000+ per year would have borne the bulk of the tax burden.
• Some additional zero-rated goods were planned, including meat (mutton, chicken, goat) and canned vegetables.

Bracket Creep (R3 billion)

• No full adjustment for inflation in tax brackets, meaning higher earners would pay more.
• Only the two lowest-income brackets would have received full inflation relief.
• Medical tax credits were not adjusted for inflation, reducing affordability for middle-income earners.
• No adjustments to capital gains tax, estate duty, or tax-free savings limits.

Excise Duties (R1 billion)

• Alcohol and cigars would have seen tax hikes of 6.83%, plus the higher VAT rate.
• Cigarette excise duty would have increased by 4.83%, plus VAT.

Other Tax Measures

• No increase in the fuel levy or sugar tax.
• No 9% excise duty on smartphones under R2,500.
• The transfer duty threshold would have risen to R1,210,000, though VAT on conveyancing would offset some benefits.

Spending Priorities

Godongwana had planned to announce a net increase of R173.3 billion in non-interest expenditure over the next three years. This spending increase would have been funded entirely by the proposed tax revenue measures, which now need to be reworked.

Key Spending Areas

• Infrastructure Investments: R46.7 billion
• Education: R19.1 billion (This would have resulted in the retention of 11,000 teachers in classrooms)
• Early Childhood Development: R10 billion
• Defence and Correctional Services: R9.4 billion
• Home Affairs: R8.1 billion
• Health: R28.9 billion

Social Grants

• An additional R23.3 billion would have been allocated to offset the VAT rate impact on low-income households.
• Old age and disability grant: Would have increased by R150 (R140 in April, R10 in October) – New amount: R2,340/month.
• Child Support Grant: Would have increased by R50 (9.4% increase) – New amount: R580/month.
• Foster Care Grant: Increase by R80.
• R35.2 billion would have been allocated to extend SRD until March 2026.

The country will have to wait until 12 March to see how Godongwana will go about balancing taxation and spending.

ALSO READ: FULL TEXT: The Budget Speech Enoch Godongwana didn’t get to deliver