Budget 2025

Testing and Strengthening South Africa's Democracy

By Jessie Taylor

South Africa’s 2025/26 Budget process has emerged not only as a fiscal turning point but also as a powerful stress test for the resilience of the country’s evolving Government of National Unity (GNU). The spirited debates and robust parliamentary engagements over the fiscal framework have revealed the complexity of coalition governance and its potential to deliver pragmatic compromises in service of national progress.

At the centre of this political moment is the fiscal framework— the essential blueprint that underpins the national budget.

For the first time in South Africa’s democratic history, this framework was shaped and passed in the context of a multiparty GNU. The process has been anything but smooth. Yet, amid tensions, walkouts, and court threats, the GNU has proven it can deliver on its core mandate: to govern collaboratively and maintain fiscal discipline.

Budget 2025: A Bold Path Forward

The 2025 Budget - delivered by Finance Minister Enoch Godongwana on 12 March - set out to stabilise South Africa’s public finances, stimulate growth, and preserve essential social protections. With a projected GDP growth rate of just 0.6% in 2024 and debt-service costs consuming 22 cents of every rand collected, the need for decisive fiscal action is clear.

One of the budget’s most debated measures is the VAT increase from 15% to 15.5% in 2025, with a further 0.5% planned for 2026. This decision was not taken lightly, said Minister Godongwana, and reflects the government’s commitment to expanding revenue while protecting the most vulnerable through above inflation increases to social grants and expanding the basket of VAT exempt basic food items.

South Africa’s gross debt is expected to stabilise at 75.3% of GDP by 2025/26. The consolidated budget deficit will narrow to 4.5%, demonstrating the government’s commitment to fiscal consolidation.

Treasury also reaffirmed its investment in public infrastructure—allocating over R1 trillion over three years—and maintaining the momentum of Operation Vulindlela to unlock structural reforms in energy, logistics, and digital access. An ambitious R943.8-billion is allocated over the medium term to public infrastructure, targeting energy, transport, and water. Eskom will benefit from funding to support the debt-relief arrangement and improve energy availability. There’s also a focus on rail network rehabilitation and expanding water access in rural areas.

Minister Godongwana added that the government remains committed to cushioning the most vulnerable South Africans. All major social grants will increase above inflation, including old age, disability, and child support grants. The Social Relief of Distress (SRD) grant, introduced during the Covid-19 pandemic, will be extended, providing a continued safety net for millions of unemployed citizens.

Budget 2025 continues to prioritise youth employment initiatives, including the Presidential Employment Stimulus and the Youth Employment Service. These programmes are expected to support hundreds of thousands of job opportunities across sectors. The government has also taken steps to contain the public sector wage bill by aligning wage increases with inflation-linked adjustments while prioritising critical service delivery roles in health, education, and policing.

A Democracy at Work

The passage of Budget 2025 unfolded through a passionate, sometimes heated, political process - but one that showcases South Africa’s evolving democracy. Far from dysfunction, the robust debates between the ANC, DA, and smaller GNU partners reflected a maturing, accountable, and transparent policymaking system.

A standout moment came from ActionSA’s constructive role in the finance committee. Although historically critical of VAT hikes, the party’s Alan Beesley offered a pragmatic resolution: allow the Budget to proceed but mandate that Parliament explore alternative revenue options within 30 days. The ANC and several GNU members adopted this compromise, enabling progress without silencing broader concerns.

While the DA has voiced strong opposition and intends to challenge the vote in court, its stance reinforces the health of South Africa’s constitutional democracy. As DA leader John Steenhuisen noted, legal review is a legitimate part of the process, not a symptom of crisis. The attention to VAT, grants, and fiscal policy has sparked meaningful national debate.

The Finance Committee’s reportshaped with input from ActionSA - doesn’t give Treasury a blank cheque. It calls for alternative proposals and public consultation, striking a balance between fiscal urgency and inclusive policy development.

Looking ahead, the Treasury must engage Parliament on tax alternatives, reaffirming a commitment to social protection. If this collaborative momentum continues, the government can turn the fiscal challenge into public trust—proving that responsibility and equity can go hand in hand.

The 2025 Budget process has tested the GNU—but it has also revealed new pathways for collaboration, accountability, and responsiveness. The outcome of the current fiscal review process, the pending court challenge, and future votes will undoubtedly shape the GNU’s long-term trajectory. Yet through it all, the message is clear: South Africa is not only navigating its challenges—it is learning from them and building a more inclusive, participatory democracy in the process.

Source: Daily Maverick | National Treasury | News24