Minister in the presidency Khumbudzo Ntshavheni on Thursday said cabinet has welcomed the 2025 budget tabled by finance minister Enoch Godongwana, pointing out that the increases in VAT will help finance SA’s sustainability.
Opposition parties, however, have criticised the increase in VAT over the next two years, describing it as “a punch to the gut of already struggling South Africans”.
Briefing the media on the outcomes of the cabinet meeting held on Wednesday, the same day the budget speech was delivered, Ntshavheni said it struck a balance between SA’s fiscal framework and the funding priorities of the seventh administration articulated by President Cyril Ramaphosa during his state of the nation address in February.
She said the budget, which was postponed on February 19 when parties in the government of national unity (GNU) could not agree on a two percentage VAT increase, mitigated the funding requirements’ impact on the poor and middle-income households.
Godongwana announced on Wednesday that the Treasury had opted for a 0.5 percentage point hike in each of the next two years, with the proposed increases set to generate R13.5bn in revenue in 2025/26, R30bn in 2026/27 and R32bn in 2027/ 28.
Public infrastructure spending over the next three years will top R1-trillion to grow the economy and create jobs. Spending is set to focus on three sectors: transport infrastructure (R402bn); energy infrastructure (R219.2bn); and water infrastructure (R156.3bn).
Ntshavheni said: “The allocation of over R1-trillion to infrastructure development over the medium-term expenditure framework, the establishment of alternative infrastructure financing through a credit guarantee vehicle and the introduction of multiple bid windows on the Budget Facility for Infrastructure [are] a demonstration of commitment to grow the economy through a strong infrastructure-built programme, while simultaneously improving service delivery.”
She said mechanisms for private sector participation as announced with the budget, which were part of Operation Vulindlela-driven reforms in the energy, transport and freight logistics sectors, “indicate government’s commitment to fast-tracking private sector investment and inclusive economic growth”.
The minister commended the budget for providing “mitigation measures” against the tax increases, saying there was no increase in the fuel levy, while old-age and disability grants increased by R130 to R2,315 in 2025.
“Most significantly, the tax increases are going to finance sustainability of this country by maintaining 11,000 teachers in the classrooms, 9,300 health workers in their jobs, the employment of 800 post-community service doctors, and [by allowing] an additional 700,000 children (four years of age) access to early childhood development, which is the necessary foundation education they need for a successful education journey,” Ntshavheni said.
On economic growth, the cabinet said the 0.6% GDP growth in the fourth quarter of 2024 “signals a recovery across the economy, as the agriculture, finance, trade and household sectors grew in the last quarter of the year”.
“The agricultural industry rebounded by 17.2%, lifting GDP growth by 0.4 of a percentage point. The finance, real estate and business services industry grew for an eighth consecutive quarter, with financial intermediary, real estate activities and other business services being the largest positive contributors to growth.”
Ntshavheni said cabinet was confident the increased focus and pace of delivery on economic structural reforms, improved service delivery and state capacity, and increased participation of the private sector “will spur further growth of the economy in 2025 and beyond”.
Cabinet welcomed the announcement by tech giant Microsoft SA that it would invest R5.4bn in AI infrastructure in the country. “This investment will strengthen SA’s position as a leading artificial intelligence hub on the African continent and builds on Microsoft SA’s R20.4bn investment over the past three years,” Ntshavheni said.
“Microsoft SA also announced their contribution to developing SA’s digital literacy by paying for technical certification for 50,000 individuals in high-demand digital skills.”
On energy, the minister said that cabinet received a report on work undertaken by power utility Eskom to improve electricity generation and stabilisation of the national grid to avert more incidents of load-shedding.
“After the recovery of more than 300MW of generation capacity and replenishment of sufficient reserves, load-shedding was suspended at 10am on Sunday March 9. Coal operations at Kusile Power Station are at optimal levels, with all units which were offline as of Friday March 7 now successfully returned to service and the Koeberg unit 2 was successfully brought back to service,” Ntshavheni said.
“The overall generation performance since the summer of 2024 has shown significant improvements and stability, resulting in 98% of load-shedding-free days. Eskom remains optimistic for a positive outlook for the remainder of the summer period.”
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