The social grants spending allocation plummeted between February 19 and today, according to the revised budget tabled by finance minister Enoch Godongwana.
Between the February and March budgets, the allocation for grants fell from R23.3bn to R8.2bn over the medium term.
This makes child support, old-age and disability grant recipients along with the department of home affairs and the country’s contingency reserve, among the biggest losers in the second version of this year’s budget.
In February, the Treasury explained that the R23.3bn allocation to social grants had factored in the (now rejected) VAT increase of two percentage points.
Total consolidated government spending is expected to grow at an average annual rate of 5.6%, from R2.4-trillion in 2024/25 to R2.83-trillion in 2027/28, slightly lower than the 5.8% growth projected in February’s budget (R2.84-trillion by 2027/28).
In real terms, consolidated spending grows by 1.1% over the medium term.
Taxpayers
In the revised budget, the Treasury decided to raise the VAT rate by 0.5 percentage points in each of the next two years, bringing VAT to 16% in 2026/27 (an increase of only one percentage point).
While this sounds like a better deal than in February, the Treasury has announced personal income-tax brackets will remain unchanged despite inflation effectively reducing disposable income for most taxpayers. This will hit salaried employees the hardest.
Small buffer for emergencies
The contingency reserve used for rollovers and unforeseeable or unavoidable risks dropped from R8bn to R5bn in the revised budget.
The head of the Treasury’s budget office, Edgar Sishi, told journalists at a briefing that due to the adjustment in terms of the decision on tax revenue increases, other trade-offs were made requiring a “different mix of things”.
“As we indicated in February, the money must come from somewhere,” Sishi said.
“Of course, what that essentially means is, particularly going into 2025/26, the space and the room to deal with unforeseen and unavoidable expenditure pressures are much smaller. This is something we were, of course, hoping to address as part of the fiscal framework, but we had to delay that.
“[That reserve] can include things like disasters, but it can also include the need to deal with any loss of funding, including foreign aid.”
However, the Treasury still aims to increase the size of the contingency reserve over the medium term.
At the media briefing before the speech, journalists were told that the government was taking steps regarding potential disasters, including infrastructure and other insurance products to mitigate risks.
Social development hit hard
The entire social development sector, which supports poverty reduction, social grants, welfare services, gender equality initiatives and child, youth and elderly advocacy, was allocated R422.3bn in 2025/26 — down from R427bn in February.
Old-age grants were cut from R118.8bn to R117.4bn; child support grants were reduced by more than R3bn, from R93.5bn to R90.4bn; annual medium-term expenditure framework (MTEF) growth was lowered to 4.9% from 6.4%; and the growth rate of disability grants was revised down from 6.2% to 5.4%.
Despite these cuts, the number of social grant beneficiaries is expected to rise (excluding the Covid-19 relief grant) from 19-million in 2025/26 to 19.3-million in 2027/28, mainly due to an ageing population.
The Treasury warned that the sector’s operational budget would be subject to conditions, including improved biometric verification of recipients to achieve savings.
This adjustment means that, in April 2025, the following grant increases will take effect: old-age grant, war veterans grant, disability grant and care dependency grant will each increase by R130 (down from R150 promised in February); foster-care grant will rise by R70 to R1,250; child-support grant and grant-in-aid grant will increase by R30 to R560.
The Covid-19 social relief of distress grant, which supports 8.5-million people, was extended by another year until March 31 2026, with its R35.2bn allocation remaining unchanged.
Government employees
As part of the 2025 public-service wage agreement, remuneration of government employees will rise 5.5% in 2025/26 — one percentage point above projected inflation. Over the following two years, wage growth will align with the consumer price index (CPI), according to the Budget Review.
This agreement will cost the fiscus an additional R7.3bn in 2025/26, R7.8bn in 2026/27 and R8.2bn in 2027/28.
While spending on police, defence and prisons remained unchanged from February, the department of home affairs took a cut from R8.1bn to R3.3bn over the midterm, meaning negative expenditure growth.
This cut relates to the digitisation of systems and human resources potentially delaying improvements at border posts, and hindering efforts to expedite the processing of visas, passports and identity documents.
Sin tax
Since the details of the new alcohol excise taxation framework will only be finalised after today's budget, the government proposes increasing excise duties on alcoholic beverages, pipe tobacco and cigars by 6.8%, while cigarettes and cigarette tobacco will see a 4.75% hike.
Provisional allocations
Provisional allocations were reduced from R75.6bn in February to R70.7bn.
These amounts are primarily set aside for goods and services and compensation of employees in critical front-line services, including provincial health and education, expanding early childhood development (ECD), hiring doctors post-community service, increasing medicine and medical supply availability and strengthening the Border Management Authority.
Meanwhile, allocations for health services (R289.9bn), infrastructure and agriculture have remained unchanged since February.
State-owned enterprises
The Treasury has taken a strict conditional approach to state-owned enterprises (SOEs) signalling limited appetite for bailouts despite pressure from the ANC to provide Transnet with a relief package similar to Eskom’s 2023 rescue.
Transnet, which faces a R50bn infrastructure backlog is under mounting pressure, with its debt projected to reach R151bn in 2025. In its report, PwC mentioned a R90bn infrastructure upgrade that was needed.
Godongwana said earlier that any further support would be carefully managed — that SOEs must demonstrate financial discipline and operational improvement before receiving state aid.
As a result, Eskom and Transnet, again, received no additional bailouts in the final budget.
Update: March 12 2025
This story has been updated with additional information.
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