THE African National Congress (ANC) has unveiled its 2025 National Budget, a R2.59 trillion fiscal plan that claims to balance growth and equity but instead entrenches inequality, rewards inefficiency, and imposes austerity specifically on the nation’s poor.
Delivered by Finance Minister Enoch Godongwana on March 12, the budget reflects a government grappling with economic stagnation, mounting debt, and political fragility. While framed as a necessary step toward fiscal consolidation, the budget imposes disproportionate burdens on low-income households while failing to address systemic inefficiencies and corruption.
VAT increase: A regressive taxation strategy
The most controversial feature of the budget is the proposed increase in value-added tax (VAT). The VAT rate is set to rise by 0.5 percentage points in 2025/26 to 15.5% and by another 0.5 percentage points in 2026/27 to 16%. This measure is projected to generate R28 billion in additional revenue for 2025/26 and R14.5 billion in 2026/27, helping to fund government priorities such as early childhood development, commuter rail upgrades, and hiring additional frontline workers.
However, this increase disproportionately affects low-income households, who spend a significant portion of their income on VAT-able goods. Treasury’s VAT Impact Assessment estimates that the bottom 40% of earners will see their living costs rise by an average of 1.8% in 2025/26. Although the Treasury has expanded the list of VAT zero-rated items to include a variety of meat products, including from sheep, poultry, goats, swine, and bovines, as well as canned and bottled vegetables and dairy liquid blends, essential goods like baby formula and cooking oil remain excluded.
For over 28 million South Africans reliant on social grants, this regressive tax policy exacerbates financial hardship. Social grants have been marginally increased but fail to keep pace with inflation or rising living costs:
Old Age Grant: Increased by R100 to R2,315 per month, a 4.5% hike that barely matches projected inflation of 4.3%.
Child Support Grant: Raised by R30 to R590 per month, covering less than half the monthly cost of a nutritious diet for children.
Social Protection Spending: Allocated R422.3 billion, which remains insufficient given South Africa’s high levels of poverty and unemployment. While the ANC defends the VAT hike as necessary for fiscal sustainability, critics argue it reflects a lack of political will to pursue more equitable revenue-generation strategies.
Government bloat persists amid austerity for the poor
Despite imposing austerity measures on vulnerable populations, the government has failed to address inefficiencies and wasteful spending within its own ranks:
Public Wage Bill: The public sector wage agreement allocates R716 billion for compensation in 2025/26, an above-inflation increase of 5.5%. This comes despite ongoing inefficiencies such as “ghost workers” in provincial departments and municipalities.
Executive Perks: Ministerial perks have increased drastically, with all 34 deputy minister positions, for example, retained at an annual cost of over R185 million.
State-Owned Enterprises (SOEs): Bailouts for Eskom, Transnet, and SANRAL total R64 billion. Eskom alone receives R24 billion earmarked for debt servicing rather than infrastructure repairs or grid stabilisation.
These allocations highlight misplaced priorities that protect patronage networks while neglecting critical investments in education, healthcare, and infrastructure.
Cuts to essential services
While the budget includes some increases in social spending, these are insufficient to address South Africa’s growing socio-economic challenges:
Education: Basic education receives R349.6 billion—an increase of just 2%. Meanwhile, thousands of schools still lack basic infrastructure such as water and sanitation. A number of teacher posts remain unfilled.
Healthcare: Provincial health budgets grew by a meagre R4 billion despite chronic staff shortages and overcrowded clinics.
Infrastructure: Although R46.7 billion is allocated for infrastructure investments over the medium term, this remains inadequate given South Africa’s massive infrastructure backlog.
These funding choices reveal a government unwilling or unable to make bold decisions that could genuinely improve living conditions for its citizens.
Social spending falls short
The budget allocates R1.52 trillion—or nearly 61% of consolidated non-interest spending—to social services over the next three years. However, this “redistributive” spending is undermined by its inadequacy relative to inflationary pressures and rising poverty levels:
The old age grant increase of R100 does little to alleviate financial strain on pensioners facing soaring costs for electricity and medicine.
The child support grant increase of just R30 fails to address child poverty rates exceeding 60%, according to Statistics South Africa.
Provincial allocations for health and education remain insufficient despite growing demand for these services.
These figures underscore a broader failure to prioritise meaningful social investment over short-term fiscal targets.
Political fragility exposed
The ANC’s reliance on coalition partners has exposed its political vulnerability in Parliament. With only 159 seats, far short of the required majority, the ANC must rely on conditional support from smaller parties like the Inkatha Freedom Party (IFP) to pass its budget. The IFP has demanded increased rural infrastructure funding of R4.2 billion compared to the allocated R3.1 billion and concessions on traditional leader stipends as conditions for its support.
Even if secured, this support may not be enough as other opposition parties remain staunchly opposed to key elements of the budget, particularly the VAT hike. This political fragility raises questions about whether the ANC can effectively govern under such strained conditions.
The DA’s rejection of the VAT hike (“a heartless cash grab,” per DA leader John Steenhuisen) and the MKP’s outright refusal to endorse “Ramaphosa’s betrayal of workers” leave the ANC scrambling. To pass the budget, the ANC (159 seats) needs 201 votes. With the EFF (45 seats), DA (87), and MKP (58) opposed, the IFP’s conditional support is critical. Even if the ANC secures the IFP, it must still court micro-parties like the Freedom Front Plus (FF+, 6 seats) or the African Christian Democratic Party (ACDP, 4 seats), a humiliating spectacle for a once-dominant liberation movement.
Economic outlook: Modest growth amid structural challenges
The budget projects real GDP growth of 1.9% in 2025—up from an estimated 0.8% in 2024 driven by improved investor confidence, stable electricity supply, and lower interest rates. However, economic growth is expected to average just 1.8% over the medium term due to structural challenges such as high unemployment (estimated at over 32%) and low productivity growth.
While the government plans to invest significantly in infrastructure, including passenger rail upgrades and disaster reconstruction—these efforts are undermined by inefficiencies in project execution and persistent corruption within state institutions.
Alternatives Ignored
The ANC had viable alternatives to regressive taxation but chose not to pursue them:
Wealth Tax: A modest tax on high-net-worth individuals could generate billions annually without burdening low-income households.
Asset Sales: Selling non-core state assets could raise substantial funds while improving public-sector efficiency.
Corruption Recovery: Recovering even a fraction of annual corruption losses estimated at R300 billion could fund critical social programs without increasing taxes.
These measures align with global best practices for equitable fiscal policy but were overlooked in favour of easier revenue-generation strategies like VAT hikes. But no, they chose the path of least resistance, taxing the poor more.
Conclusion: A missed opportunity
The ANC’s 2025 budget reflects a government prioritising political expediency over transformative change. By increasing VAT while preserving wasteful expenditures and underfunding essential services, it fails South Africa’s most vulnerable citizens.
This budget represents a missed opportunity to address inequality through bold reforms such as taxing wealth instead of consumption or reallocating funds from inefficient programs toward critical social investments. Until these structural issues are addressed, South Africa’s economic recovery will remain fragile, and its most marginalised citizens will continue to bear the brunt of fiscal mismanagement.
In its current form, this budget does little more than perpetuate systemic inequities while exposing the ANC’s waning political dominance, a sobering reality for a party once synonymous with liberation but now mired in skewed austerity politics that betray its founding principles.
(Dube is a political economist, businessman, and social commentator on Ukhozi FM. His views don't necessarily reflect those of the Sunday Tribune, Independent Media, or IOL. Read more of his articles here: www.ncodube.blog)