Key points
- After a failed first attempt at presenting the 2025/26 budget, the revisions tabled were disappointing, albeit with a smaller VAT hike and other measures that show little indication that Treasury under the GNU is heading into a different direction that will support economic growth. Revenue increases based on higher taxes on consumption will only increase the tax burden on the already strained lower and middle-income classes. At the same time, increased spending on social grants and public sector wages will fail to improve SA’s poor fiscal trajectory.
- What is different this time around is that the budget will not easily be accepted by parliament, given that the ANC no longer has majority. Several GNU partners have already voiced their dissatisfaction and have outright said they will reject it. Therefore, more compromises may be instore over the weeks ahead.
Baseline view
The 2025/26 budget 2.0 was a disappointment, with National Treasury under the GNU not implementing the kind of growth reforms needed. While there were some positives regarding infrastructure investment and increased private sector participation, these need to occupy a greater share of government’s focus. The question now is what the final outcome will be, given that the GNU partners are unlikely to accept the VAT increase or its failure to adequately address non-productive expenditure.
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