In a climate of rising economic uncertainty and growing social needs, South Africa’s penultimate budget statement for 2025 signals a sharp turn toward fiscal consolidation.
Finance Minister Enoch Godongwana made tough choices — trimming ambitious projects and scaling back spending increases — to shore up the country’s financial stability.
The headline figure: R68-billion in spending reductions over the medium term. Much of this comes from clawing back provisional allocations — funds that hadn’t yet been officially assigned.
Planned increases reversed
While the baseline budgets for most government departments remain steady, planned increases have been pared down, a direct consequence of reversing the VAT hike proposed earlier in the year.
Treasury also tightened the tap on new spending. Additional allocations, originally set to rise by R232.6-billion when the budget was tabled in March, have been trimmed to R180.1 billion — a R52.5-billion cut in the space of a few months.
Education and health remain on the government’s protected list, but not without casualties. The education sector will see only R9.5-billion in new funds over three years, primarily for retaining and hiring teachers — a far cry from earlier, more generous proposals.
Health receives R20.8-billion, mainly to support post-community service doctors and essential services, though this too is less than initially planned.
Social grants
Social grants — often the government’s last line of defence against poverty — will rise, but only modestly. The old-age grant increases by just R120 per month (to R2,310), with a further R10 top-up from October 2025. The Covid-19 Social Relief of Distress (SRD) grant is extended through March 2026, but there’s no new commitment to make this or other grants permanent.
Long-term and high-profile projects are feeling the squeeze. The budget defers or reduces funding for Prasa’s rail fleet renewal and signalling upgrades, large BFI infrastructure ventures, and even population-based adjustments to provincial allocations. Notably, R12.3-billion earmarked for Prasa signalling is now only provisional, putting the project at risk.
Pepfar’s withdrawal of funding leaves key HIV/Aids programmes in limbo, with no new allocation to fill the gap. In politics, funding for parties and royal infrastructure is on hold as well. Despite these constraints, infrastructure spending still tops R1-trillion. Yet, the government admits that municipal services like water and electricity remain poor, putting local revenue collection — and by extension, future budgets — at risk.
Military spending
Military spending tells a similar story of retreat. R5-billion once set aside for peacekeeping in the DRC has been mostly cut, with R3-billion redirected to bring South African troops home. Meanwhile, R1.4-billion is set aside for election security, benefiting the IEC and police.
Municipalities will share R552.7-billion, but Treasury warns that persistent service failures threaten the financial sustainability of local governments.
A silver lining: Treasury is targeting savings through efficiency. Reviews have identified R37.5-billion in potential cuts by rooting out payroll fraud and duplications. Underperforming programmes are set to be closed in the next budget cycle. Payroll audits will now rely on data analytics, replacing expensive census-style head counts.
Anti-corruption efforts have also yielded dividends. The Asset Forfeiture Unit has clawed back R5-billion over five years. And R8-billion was recovered from state capture cases is flowing back into government coffers.
Pressing needs unresolved
Ultimately, the 2025 budget is a story of restraint. Expenditure cuts, deferred projects, and efficiency reforms are the order of the day. The government has shielded core social services from drastic cuts. However, pressing needs — from HIV/Aids programmes to commuter rail modernisation — remain unresolved.
The bottom line: With lower-than-expected VAT revenues, Treasury is forced into a holding pattern. It is prioritising immediate fiscal stability over bolder, transformative investments. For South Africa, it’s a pause — perhaps necessary, but not without cost.
