SA’s third national budget of 2025 has been welcomed by economists as a more sober, realistic fiscal plan than the previous versions.
Though downgraded growth forecasts have pushed the debt-to-GDP ratio higher than in previous budgets, analysts said the Treasury had broadly preserved its fiscal strategy — maintaining its commitment to debt stabilisation, spending restraint and modest revenue adjustments — even after withdrawing the proposed VAT hike under political pressure.
“Compared with the fireworks of the first two proposed budgets the third version was decidedly uneventful. However, in this context, boring is good, and the financial market response was muted,” Old Mutual wealth investment strategist Izak Odendaal said.
Elna Moolman, head of SA macroeconomic research at Standard Bank Group, described the third version as broadly aligned with expectations.
“Fiscal consolidation is still prioritised. The expenditure changes are dominated by scaling back some of the new spending proposed in the previous versions of the budget (notably for front-line services) while the revenue adjustments include both the reversal of some of the tax relief previously proposed — the fuel levy will now increase in line with inflation, as expected — and unspecified future tax hikes,” she said.
“Improved debt collection by the SA Revenue Service may, according to Treasury’s estimates, negate the need for these future tax hikes.”
While R18bn in new tax revenue is expected in 2025/26, further measures of R20bn are planned for 2026.
Oxford Economics chief economist Jee-A van der Linde described the new budget as “more sensible” than its predecessors adding it “depicts a stark picture of SA’s finances”.
“Markets will welcome the Treasury’s commitment to fiscal consolidation,” he said, welcoming that gross loan debt projections remained unchanged from March.
However, he cautioned that revisions to GDP growth have worsened the debt-to-GDP ratio, a trend that will be hard to reverse without faster growth.
Van der Linde acknowledged while Treasury’s core assumptions are intact, the repeated rewriting of the budget has had some cost to credibility — even if not of Treasury’s own making.
“Political parties have been climbing over each other trying to claim credit” including a “VAT victory” march by the EFF.
Still, Moolman described the budget as “neutral for financial markets”, pointing to steady debt issuance and the peak in debt-GDP this year — something director-general Duncan Pieterse called “an accomplishment” in the budget press briefing.
Van der Linde echoed this sentiment though he said sustainability would depend on reforms gaining traction, particularly through the second phase of Operation Vulindlela.
Johann Els, Old Mutual chief economist, called the market impact “muted positives amid lingering risks” adding it would be reassuring for bond and equity markets due to policy stability, fiscal realism and credible consolidation.
However, investors remain cautious, Els said.
“Growth assumptions may be optimistic. Debt ratios are worsening in relative terms. Execution risks remain high. Nonetheless, this version is more market friendly than the previous two budgets and sits at the optimistic end of market expectations.”
Andrew Golding, CEO of the Pam Golding Property, welcomed that Budget 3.0 retained the 10% increase in the threshold for transfer duties, “which means that properties up to R1.21-million are exempt, which is meaningful for first-time buyers as the average price paid by a first-time buyer from January to April 2025 was R1.245m, according to ooba Home Loans”.
He hoped the fuel levy increases (by 16c per litre for petrol and 15c for diesel) would be offset by indications that fuel prices will decrease by an estimated 23c per litre in June.
“It is also unfortunate that allowance has not been made for tax bracket creep to allow for inflation, as in effect, this results in higher tax being paid by individuals who are pushed into higher tax brackets,” Golding said.
Casey Sprake, economist at Anchor Capital, noted “to improve the efficiency of public spending the National Treasury has committed to redesigning the budget process from 2026 onward, incorporating insights from a series of detailed spending reviews. If executed effectively, these reforms could generate an additional R38bn in fiscal savings.”
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