Investing for faster growth

12 March 2025
Overview
• The 2025 Budget lays the foundation for faster economic growth and continues to stabilise the public finances.
• South Africa’s economic outlook is slowly improving, with GDP growth expected to average 1.8 per cent over the next
three years.
• Investing in strategic infrastructure, supporting job creation and maintaining a growth-friendly fiscal policy will
underpin government policy over the medium term.
• In 2025/26, government debt will stabilise at 76.2 per cent of GDP. Debt-service costs, which consume 22 cents of
every rand of revenue, stabilise in the current year.
• In light of new and persistent spending pressures, government has decided to raise additional tax revenues,
including by increasing the value-added tax (VAT) rate by 0.5 percentage points in each of the next two years and not
adjusting personal income tax brackets for inflation.
• Tax measures enable additional funding in several key areas, including education, early childhood development, and
health.
• The impact of the tax measures on the most vulnerable households will be cushioned by real increases in social
grants, an expansion of the list of VAT zero-rated foods and continued fuel levy relief.

2
Near-term global growth prospects remain stable at 3.3 per cent
below the historical average
Economic growth in selected countries
Region/country 2023 2024 2025 2026
Percentage Actual Estimate Forecast
• Regional performances vary, with the US
World 3.3 3.2 3.3 3.3
experiencing upward revisions due to carryover
Advanced economies 1.7 1.7 1.9 1.8
effects from 2024, Euro area growth is
United States 2.9 2.8 2.7 2.1 dampened by geopolitical tensions and
Euro area 0.4 0.8 1.0 1.4 uncertainty.
United Kingdom 0.3 0.9 1.6 1.5 • China’s fiscal package is likely to mitigate the
Japan 1.5 -0.2 1.1 0.8 negative effects of trade policy related
Emerging and developing countries 4.4 4.2 4.2 4.3
Brazil 3.2 3.7 2.2 2.2
uncertainty and weak property sector.
Russia 3.6 3.8 1.4 1.2 • Inflation has continued to ease, allowing for
India 8.2 6.5 6.5 6.5 interest rate-cuts, with focus shifting from
China 5.2 4.8 4.6 4.5 monetary to fiscal tightening.
Sub-Saharan Africa 3.6 3.8 4.2 4.2
Nigeria 2.9 3.1 3.2 3.0 • Structural constraints such as low productivity
South Africa 1
0.7 0.8 1.9 1.7 and aging populations limit long-term growth
World trade volumes 0.7 3.4 3.2 3.3 in many developed economies.
1. National Treasury forecast
Source: IMF World Economic Outlook, January 2025
3
NT projects growth of 1.9 per cent in 2025, from a revised estimate of
0.8 per cent in 2024
Macroeconomic performance and projections
Percentage change 2021 2022 2023 2024 2025 2026 2027
Actual Estimate Forecast
Final household consumption 6.2 2.5 0.7 1.0 1.9 1.5 1.7
Final government consumption 0.6 0.6 1.9 1.5 3.8 -0.1 0.3
Gross fixed-capital formation -0.4 4.8 3.9 -3.6 5.0 5.2 3.7
Gross domestic expenditure 4.9 4.0 0.8 -0.0 2.6 1.7 1.8
Exports 9.7 6.8 3.7 -2.8 3.4 3.2 3.1
Imports 9.6 15.0 3.9 -5.3 5.7 3.1 2.7
Real GDP growth 5.0 1.9 0.7 0.8 1.9 1.7 1.9
GDP inflation 6.3 5.2 4.8 4.1 4.9 4.7 4.5
GDP at current prices (R billion) 6 220 6 656 7 024 7 365 7 872 8 387 8 932
CPI inflation 4.6 6.9 5.9 4.4 4.3 4.6 4.4
Current account balance (% of GDP) 3.7 -0.5 -1.6 -1.6 -2.3 -2.4 -2.6
Sources: National Treasury, Reserve Bank and Statistics South Africa
• National Treasury projects growth of 1.9 per cent in 2025, from a revised estimate of 0.8 per cent in 2024, which reflects the weaker than expected GDP outcome in
the 3rd quarter, driven by a sharp contraction in the agricultural sector.
• Medium-term GDP growth is expected to average 1.8 per cent from 2025 to 2027, on par with the MTBPS forecast. Despite this, there are some compositional
changes.
• Household consumption has been revised lower, while gross fixed capital formation and government consumption is revised higher. Furthermore, compared to
MTBPS 2024, net trade is revised down due to increased import volumes following stronger gross domestic demand.
• Growth drivers: easing supply-side constraints, monetary policy easing, prudent fiscal policy, and base effects, especially on fixed investment and trade volumes. 4
Domestics risks to the economic outlook are balanced while global
risks skew to the downside
Domestic risks
• Logistical challenges remain a constraint on output, investment, and economic growth
• Unfunded spending pressures or the materialisation of contingent liabilities would undermine the fiscal strategy and
weaken the outlook
• A faster-than-expected easing in interest rates and inflation would boost consumer spending
• Domestic food prices could benefit from better grazing conditions with a recovery in livestock
• Greater-than-expected withdrawals from the Two-Pot retirement system would lead to higher-than-anticipated levels of
consumption
• Continued stable electricity supply, and progress in reforms, could boost business confidence
• A rapid uptake of renewable energy investment by the private sector and municipalities could drive stronger growth
outcomes over the medium-to-long term
Global risks
• Heightened concerns over escalating protectionist measures, geopolitical tensions, and trade disruptions could spike
commodity prices and reignite inflation
• A stronger US dollar may cause capital outflows in emerging markets and higher risk premiums
• Upside risks are limited but include potential growth from accelerated structural reforms and multilateral policies that
reduce uncertainty
5
Government’s medium-term economic strategy is anchored by four
priorities
To bolster growth and employment, government’s economic strategy prioritises:
• Maintaining macroeconomic stability and reducing volatility to reduce the cost of living and encourage investment.
• Implementing structural reforms to increase efficiency and promote a competitive economy, while addressing
constraints to job creation and employment.
• Building state capability by identifying and solving problems in the delivery of core functions, supported by digital
transformation.
• Supporting growth-enhancing public infrastructure investment to increase productivity and long-term economic
prospects.

6
Operation Vulindlela continues on delivering ambitious set of reforms
in its second phase

New priorities for phase II:

• Local government: Institutional, governance and financial reforms to address the root causes of deteriorating performance​ and create
sustainable utilities
• Spatial inequality: Creating dynamic cities that support economic growth and generate employment
7
• Digital transformation: Investing in digital public infrastructure to enhance service delivery and expand financial inclusion
 Government’s fiscal strategy is on track to deliver a debt-stabilising
primary budget surplus by of 2025/26
Strengthening fiscal sustainability Tax policy measures and other Pro-growth infrastructure and A sustainable public-service wage
and accountability revenue revisions social spending allocations agreement

• Government remains • Government proposes R28 billion • Public servants will receive a
committed to the balanced in additional tax revenue measures 5.5 per cent wage increase in
fiscal strategy. The consolidated in 2025/26 and R14.5 billion in • R46.7 billion added to 2025/26, exceeding projected
budget deficit is expected to 2026/27. infrastructure plans over the CPI inflation.
narrow to 3.5 per cent of GDP medium term
by 2027/28. • Non-tax revenue estimates are • The wage agreement will cost
adjusted lower by R3.3 billion in • 61 per cent of consolidated the government an additional
• A primary budget surplus of the outer two years of the MTEF non-interest spending will R7.3 billion in 2025/26, R7.8
0.5 per cent of GDP is expected period mainly due to lower mineral support low-income and billion in 2026/27, and R8.2
this year, rising to 0.9 per cent and petroleum royalties vulnerable households over the billion in 2027/28.
in 2025/26. This means projections. medium-term expenditure
revenue is higher than non- framework (MTEF) period. • The government is reactivating
interest expenditure, enabling • R4 billion revenue expected from early retirement without
the sale of strategic oil reserves will • Government is undertaking penalties
debt to stabilise in 2025/26. reforms to improve the
flow to the National Revenue Fund
• The government is consulting in 2025/26 efficiency of infrastructure
on potential longer-term fiscal financing and build the pipeline
anchors, focusing on • Payments to the Southern African of blended finance projects.
procedural reforms for Customs Union have been revised
transparency and up by R2.2 billion in 2026/27 and
accountability. R5.4 billion in 2027/28 compared
with the 2024 MTBPS estimates
8
Infrastructure investment will continue to support growth
• Public Infrastructure Investment: Over the next three years, R1.03 trillion will be allocated to public infrastructure, with major
allocations to roads (R402 billion), energy (R219.2 billion), and water and sanitation (R156.3 billion). The main budget adds R46.7
billion for infrastructure projects over the medium term.
• Institutional Reform for Infrastructure Delivery: A single structure overseen by the National Treasury will be established during
2025/26 to coordinate state participation in project preparation and planning, public-private partnerships (PPPs), funding and
credit guarantees. It will consolidate two units currently in the Government Technical Advisory Centre that coordinate PPPs and
capital appraisals with the Infrastructure Fund in the Development Bank of Southern Africa.
• Public-Private Partnerships (PPP) Reform: PPP regulations have been streamlined, reducing approval requirements for projects
below R2 billion from June 2025. A clear framework is being established to receive and process unsolicited PPP proposals or bids
from the private sector. Revised manuals and guidelines on PPPs are being produced and will be made available to the public.
• Budgeting and financing for Infrastructure: State-owned companies, public entities, and municipalities will fund 72.7 per cent
(R748.5 billion) of total public-sector capital investment from their budgets. For the 2025 Budget cycle, the Budget Facility for
Infrastructure has approved nine projects with a total value of R55.5 billion, of which R15.3 billion will funded by the Facility,
supporting critical areas such as hospital infrastructure, transport and logistics, and water.
• Performance-Based Financing: The 2025 Budget introduces a performance-based conditional grant for certain trading service
entities that provide basic services, such as municipal water. This will incentivise financial and operational reforms to improve their
functioning and sustainability.
9
Why is government increasing taxes?
• An increase in spending has to be accompanied by an increase in revenue. Government will
maintain its commitment to maintaining a rising primary surplus and stabilising debt.
• New and persistent spending pressures in several key areas, including educator costs, early
childhood development, and health, among other things, have necessitated the tax increase.
• These spending pressures are included as part of total additions listed in Chapter 5 of the Budget
Review.
• Government had to decide whether to leave these matters unattended or to address them.
Providing these and other services has large spending implications that require additional revenue.
• The immediate nature of these spending pressures also required identifying the most efficient tax
increases in order to meet the spending requirements.
• While the Budget includes a mixture of tax measures, government still considers that a VAT
increase is indispensible for raising additional revenue of the required magnitude.
10
Medium-term adjustments to main budget non-interest expenditure
Changes to main budget non-interest expenditure over MTEF period
• The 2025 Budget funds spending pressures of
R million 2025/26 2026/27 2027/28 MTEF total
Non-interest expenditure (2024 Budget) 1 840 913 1 932 982 2 030 266 5 804 161
R232.6 billion over the MTEF period.
Additions to baselines and provisional allocations1 102 438 68 179 61 981 232 598
• These spending additions are partially offset by
Infrastructure projects 1 14 104 15 833 16 741 46 678
2025 public-service wage agreement and carry- 7 317 7 842 8 211 23 371
drawdowns on provisional allocations and contingency
through costs reserves, resulting in a net increase in non-interest
Early retirement costs 4 400 6 600 – 11 000 expenditure of R142 billion.
COVID-19 social relief of distress grant 35 169 – – 35 169
Social grants above-inflation increases 1 594 3 265 3 344 8 203
• The net increase in non-interest expenditure is mainly
Provisional allocations for frontline services 22 234 23 504 24 978 70 716
Other spending additions 1 17 619 11 135 8 707 37 460 funded by the additional revenue raised from the
Reductions to provisional allocations 2
-40 817 -9 098 -16 741 -66 656 proposed tax increases and carry-through over the
Changes in contingency reserve -2 600 -9 000 -9 708 -21 307
medium term.
Technical adjustments3 -448 -784 -1 412 -2 645
Revised non-interest expenditure (2025 Budget) 1 899 485 1 982 279 2 064 386 5 946 150
Change in non-interest expenditure from 58 572 49 297 34 120 141 989
2024 Budget
1. Details are in Table 5.2 in Chapter 5
2. Includes drawdown of provisional allocations for COVID-19 social relief of distress grant and public employment
programmes in 2025/26, Western Cape Rapid Schools Build Programme in 2025/26 and 2026/27 and Infrastructure
Fund in 2026/27 and 2027/28
3. Includes revisions to skills development levy projections and savings from closure of Department of Public Enterprises
Source: National Treasury
11
 Why the increase in the VAT rate?
• Government considered different options to raise the required revenue.
• However, increases in PIT and CIT would been more negative for employment, savings, investment
and growth than a VAT increase.
• CIT is imposed on businesses, but ultimately paid by shareholders, workers and consumers.
• South Africa already has a high contribution of CIT towards tax revenue and VAT is relatively low
compared to our peers.

12
 Why the increase in the VAT rate?
• South Africa has a high share of personal income tax as a per cent of GDP and a high top tax rate, both of which are much higher than
other developing economies.
• Previous tax rate increases for PIT did not raise the expected revenue as taxpayers changed their behaviour to avoid the tax. It is far
harder to avoid a VAT increase and the behavioural responses are lower, reducing the impact on the economy.
Personal income tax as a share of GDP and top rates, 2024 Change in real taxable income

13
 What has government done to mitigate the impact of the increase in
the VAT rate?
• Government has provided direct relief to vulnerable
households to mitigate the impact of the increase in the VAT
rate by increasing the old-age grant, the disability grant and
the child support grant by amounts above expected inflation

• The basket of zero-rated items will also be expanded to

include canned vegetables, edible offals of sheep, poultry and
other animals, and dairy liquid blends to provide further
relief.
• The benefit from the previous items that were VAT zero-rated
did not appear to be fully passed through to lower-income
households, indicating that this is a blunt approach. However,
prices did decrease to provide some benefit.
• The general fuel levy and RAF levy will also not be changed to
limit cost-of-living increases.

14
Criteria used for VAT zero-rated items additions
• VAT zero rating requests were evaluated against the revenue foregone to the fiscus, and the impact on lower-
income households based on consumption and expenditure patterns using equity-gain ratio analysis.
• An equity-gain ratio divides the proportional
expenditure of households in expenditure deciles
1 to 4 by the proportional expenditure of
households in deciles 9 and 10 on specific items.
• This ratio provides a measure of the
disproportionate consumption by lower-income
households.
• Items with a higher equity-gain ratio indicates
that lower-income households spend more on
those items as a proportion of their expenditure
than high-income households.
• Therefore, lower-income households will realise
more benefits from zero rating these items than
higher-income households (assuming pass-
through of benefits).
• The additional food items proposed for zero
rating in the 2025 Budget are well targeted, with
relatively limited revenue forgone to the fiscus.
15
Total additions to spending over the MTEF period
Spending additions funded over the MTEF period
R million 2025/26 2026/27 2027/28 MTEF total
Infrastructure investment 14 104 15 833 16 741 46 678
• The main spending additions are for:
• Critical infrastructure investments
Budget Facility for Infrastructure window 8 projects 3 346 5 380 3 086 11 812
Disaster management* 1 851 1 099 1 050 4 000
• Social protection
Passenger Rail Agency of South Africa* 5 890 5 423 7 923 19 236
• A higher-than-anticipated public-service wage agreement
• Provisional allocations for critical frontline services.
Turnaround revenue-generating services in metros* 2 404 2 031 4 022 8 457
Western Cape Rapid Schools Build Programme 1 048 1 250 – 2 298 • After the approval of the 2024 Medium Term
Drakenstein project allocation – 225 – 225 Budget Policy Statement (MTBPS), provisional
Rescheduling of MyCiTi -435 425 660 650 allocations were increased by R70.7 billion.
2025 public-service wage agreement and carry-through costs 7 317 7 842 8 211 23 371
• These amounts are provisionally allocated mainly
Early retirement costs* 4 400 6 600 – 11 000 for goods and services and compensation of
COVID-19 social relief of distress grant 35 169 – – 35 169 employees in critical frontline services. This
Social grants above-inflation increases 1 594 3 265 3 344 8 203 funding will address:
Provisional allocations for frontline services 22 234 23 504 24 978 70 716 • Significant pressures in provincial health and education
Education: provincial education compensation costs 8 113 9 647 11 335 29 095 • Expand access to and improve the quality of early
and expansion of ECD provision* childhood development
Health: provincial health compensation costs, 9 311 9 644 9 991 28 946 • Support the employment of doctors after their
community service ends
unemployed doctors and goods and services*
• Increase the availability of medicines and medical
Defence: compensation costs shortfalls* 2 500 2 090 2 184 6 774 supplies, and
Correctional services: compensation costs shortfalls* 840 878 917 2 635 • Strengthen capacity within the Border Management
Home Affairs: digitisation and human 1 470 1 245 550 3 265 Authority.
resource capacitation* 16
Total additions to spending over the MTEF period (continued)
Spending additions funded over the MTEF period (continued)
R million 2025/26 2026/27 2027/28 MTEF total • The 2025 Budget also directs resources to
Other spending additions 17 619 11 135 8 707 37 460 growth-enhancing activities, particularly
SARS spending adjustments and further support 500 1 500 1 500 3 500 infrastructure, and advances regulatory
Employment programmes 4 592 – – 4 592
reforms to support investment spending.
SANRAL GFIP phase 1 debt repayment
1 8 681 4 639 3 314 16 634 • It allocates an additional R46.7 billion for
and maintenance backlog critical infrastructure projects.
SANDF troop deployment in DRC 1 800 1 747 1 480 5 027 • This includes support for projects approved as part of
carry-through coststo various institutions2
Spending additions 1 443 871 917 3 231 the Budget Facility for Infrastructure and
Local government elections – 1 435 – 1 435 • Investments in passenger rail transport to modernise
signalling technology systems that will improve service
Direct charges3 603 942 1 496 3 042 frequency, safety and efficiency.
Total additions to baselines and provisional allocations 102 438 68 179 61 981 232 598 • The budget also aims to reverse declining water,
* Provisional allocations not appropriated to votes electricity and solid waste services in cities through
1. Includes the national government portion of R3.2 billion in 2025/26 R8.5 billion earmarked for the turnaround of these
entities.
2. Includes G20 and ICASA spectrum auction cost in 2025/26, new ministries and deputy ministries carry-through costs
and financing of Parliament and Office of Chief Justice funding pressures • Funding for disaster response will be
3. Include additions for injury on duty and post-retirement medical benefits supported by reforms to address inefficiencies
Source: National Treasury in disaster management funding through a
review of the conditional grants system.
17
Gross tax revenue projections have been revised up by R137.8 billion
over the 2025 MTEF period
Revised gross tax revenue projections
1
R billion 2023/24 2024/25 2025/26 2026/27 2027/28
Revised estimate 1 740.9 1 846.3 2 006.1 2 163.5 2 306.2
Buoyancy 0.66 1.12 1.24 1.22 1.01
2024 MTBPS 1 740.9 1 840.8 1 971.8 2 111.1 2 255.2
Buoyancy 0.66 0.95 1.09 1.09 1.04
2024 Budget 1 731.4 1 863.0 1 991.2 2 133.0
Buoyancy 0.54 1.33 1.11 1.11
Projected improvement – 5.6 34.4 52.4 51.0
against 2024 MTBPS
Projected variance 9.5 -16.7 14.9 30.5
against 2024 Budget
1. Actual outcome
Source: National Treasury

• 2024/25 tax revenue is expected to be R1.85 trillion, R16.7 billion below the 2024 Budget expectations, reflecting weaker-than-expected
economic outcomes
• Improved medium‐term revenues are due to proposed policy measures, primarily the increase in the VAT rate by 0.5 percentage points in
2025/26 and 0.5 percentage points in 2026/27; and higher personal income tax collections
• As a result, the buoyancy of tax revenue for a given level of economic growth is expected to be slightly higher over the medium term. 18
Tax proposals raising R28 billion in 2025/26 and R14.5 billion in 2026/27
to alleviate spending pressures, with permanent revenue effects
1
Impact of tax proposals on medium-term revenue
2025/26 2026/27 2027/28
R million Effect of tax proposals • They include:
Gross tax revenue (before 2025 Budget tax proposals) 1 978 132 2 119 319 2 259 354
2025 Budget proposals 2
28 000 14 500
o A 0.5 percentage point increase in the VAT rate in each of
Direct taxes
3
19 500 20 634 21 960 2025/26 and 2026/27
Personal income tax
o No inflationary adjustment to personal income tax
No inflationary adjustment to tax brackets and 18 000 19 067 20 324
rebates brackets, rebates and medical tax credits
No inflationary adjustment to medical tax credits
3
1 500 1 567 1 636
o Above-inflation increases in excise duties on alcohol and
Indirect taxes 8 500 23 523 24 885
Value-added tax (VAT)
tobacco products
Increase in VAT rate — 2025/26 13 500 14 344 15 196 o The general fuel levy and RAF levy are not increased –
Increase in VAT rate — 2026/27 – 15 500 16 420
costing an initial R4 billion
Additional zero rating -2 000 -2 128 -2 262
Fuel levy o Diesel refund relief for primary sectors
No adjustment to general fuel levy -4 000 -4 257 -4 535
Diesel refund relief for primary sectors – -1 000 -1 065 o Additional items on the VAT zero-rated basket
Specific excise duties
Above-inflation increase in excise duties 1 000 1 064 1 131
on alcohol and tobacco
Net impact of tax proposals 28 000 44 158 46 845
• These measures have permanent revenue effects,
Gross tax revenue (after tax proposals) 2 006 132 2 163 477 2 306 199 the net result of which is improved revenue
1. Revenue changes are in relation to thresholds that have been fully adjusted for inflation
2. In-year tax increase with no carry through collection. 19
3. Includes carry-through effect of tax policy proposals
Source: National Treasury
Consolidated spending increases from R2.4 trillion in 2024/25 to
R2.83 trillion in 2027/28
• Spending across functions supports the implementation of policy priorities.
• Learning and culture receives 23.8 per cent (R1.61 trillion) of the total budget for functions, while the general public services function receives the
smallest share at 3.6 per cent (R243.9 billion).
• Payments for capital assets are the fastest-growing item by economic classification, mainly because of infrastructure allocations for transport and water
projects.
Average spending growth over the MTEF period by Total consolidated government expenditure,
economic classification, 2025/26 – 2027/28 2025/26 – 2027/28

Learning and culture 1 607.4

ransfers and subsidies
Debt-service costs 1 352.7

Social development 1 316.1

Goods and services
Health 941.5

om ensa on of em loyees Economic development 905.9

Community development 885.7

ebt service costs Peace and security 830.7

General public services 243.9

ayments for ca ital assets
0 300 600 900 1 200 1 500 1 800
R billion 20
er cent
The consolidated budget deficit is projected to narrow to 3.5 per cent
of GDP by 2027/28
• The consolidated budget deficit for 2024/25, projected at 4.5 per cent of GDP in the 2024 Budget, is now estimated at 5 per cent.
• The deficit is projected to decline to 3.5 per cent of GDP in 2027/28 as the main budget deficit narrows.
• Social security funds, provinces and public entities move into a combined cash deficit in 2024/25 and over the medium term.
• Over the next three years, consolidated non‐interest expenditure will increase at an annual average rate of 0.8 per cent in real terms.
Consolidated fiscal framework
2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28
Revised
R billion/percentage of GDP Outcome estimate Medium-term estimates
Revenue 1 754.8 1 900.8 1 948.0 2 029.2 2 221.9 2 377.4 2 520.6
27.7% 28.1% 27.5% 27.1% 27.8% 27.9% 27.8%
Expenditure 2 047.3 2 145.4 2 259.5 2 404.0 2 592.3 2 703.0 2 834.9
32.4% 31.7% 31.8% 32.1% 32.4% 31.8% 31.3%
Non-interest expenditure 1 771.3 1 829.7 1 896.0 2 006.1 2 158.9 2 244.6 2 346.2
28.0% 27.1% 26.7% 26.8% 27.0% 26.4% 25.9%
Budget balance -292.6 -244.6 -311.6 -374.7 -370.4 -325.6 -314.2
-4.6% -3.6% -4.4% -5.0% -4.6% -3.8% -3.5% 21
Source: National Treasury
Division of nationally raised revenue
Division of revenue
2024/25 2025/26 2026/27 2027/28 • Over the 2025 MTEF period, excluding payments for
Revised
servicing debt, the contingency reserve and provisional
R billion estimate Medium-term estimates
allocations:
National allocations 862.3 912.8 910.2 943.9 • 48.4 per cent of nationally raised revenues are allocated
Provincial allocations 730.7 767.8 798.4 833.8 to national government,
Equitable share 600.5 633.2 660.6 690.2 • 41.9 per cent to provinces and
Conditional grants 130.2 134.6 137.9 143.6
Local government allocations 167.7 176.8 185.1 190.8 • 9.7 per cent to local government.
Provisional allocations not – 37.1 83.0 84.7 • Subnational governments need to implement structural
appropriated reforms to improve spending efficiency, enhance revenue
Total allocations 1 760.7 1 894.5 1 976.8 2 053.3 management and enforce accountability.
Percentage shares
National 49.0% 49.1% 48.1% 48.0% • Conditional grant reforms focus on streamlining,
Provincial 41.5% 41.3% 42.2% 42.4%
enhancing flexibility and aligning resources with service
Local government 9.5% 9.5% 9.8% 9.7%
delivery priorities.
Source: National Treasury
22
Government will reduce the borrowing requirement over the 2025
MTEF period
Financing of national government gross borrowing requirement 1
R million
2023/24
Outcome
2024/25
Budget Revised
2025/26 2026/27 2027/28
Medium-term estimates
• In 2025/26, the gross borrowing requirement is expected to
Main budget balance
Redemptions
-322 916
-144 395
-320 946
-172 568
-352 722
-98 802
-353 896
-172 838
-313 047
-152 961
-296 352
-303 679
be R3 billion higher than projected in the 2024 Budget
Domestic long-term loans
Foreign loans
-97 250
-47 145
-132 087
-40 481
-61 538
-37 264
-112 252
-60 586
-112 252
-40 709
-277 184
-26 495
Review due to a higher budget deficit, partially offset by a
Eskom debt-relief
arrangement
-76 000 -64 154 -64 154 -80 223 – – reduction in Eskom debt relief.
GFECRA settlement (net) 4
• The final R70 billion debt takeover will now be replaced
– 100 000 100 000 25 000 25 000 –
Total -543 311 -457 669 -415 678 -581 957 -441 008 -600 031
Financing
Domestic short-term loans
Treasury bills (net)
88 745
88 084
33 000
33 000
38 932
38 932
38 100
38 100
35 900
35 900
48 000
48 000
with two advances amounting to R50 billion: R40 billion in
Corporation for 661 – – – – – 2025/26 to redeem debt maturing in April 2026 and
Public Deposits
Domestic long-term loans 336 239 328 100 345 000 343 200 323 400 431 700 R10 billion in 2028/29 for debt maturing in May 2028.
Market loans 336 079 328 100 343 933 343 200 323 400 431 700
Loans issued for switches
Loans issued
824
-664
–
–
1 067
–
–
–
–
–
–
– • Over the next three years, net Treasury bill issuances will
for repos (net)
Foreign loans 45 663 36 700 67 027 99 342 82 101 96 658 average R40.7 billion, with long‐term borrowing averaging
Market loans
Change in cash and
45 663
72 664
36 700
59 869
67 027
-35 281
99 342
101 314
82 101
-393
96 658
23 674 R366.1 billion.
other balances2
Cash balances
Other balances
3
42 672
29 992
53 112
6 757
-39 510
4 229
96 358
4 956
-4 537
4 144
19 354
4 320
• Over the medium term, government will raise about
Total
Percentage of GDP
543 311
7.7%
457 669
6.1%
415 678
5.6%
581 957
7.3%
441 008
5.2%
600 031
6.6%
US$14.6 billion to meet its foreign exchange commitments.
1. A longer time series is presented in Table 1 of the statistical annexure at the back of the Budget Review
2. A positive value indicates that cash is used to finance part of the borrowing requirement
3. Differences between funds requested and actual cash flows of national departments
4. In 2024/25, the Reserve Bank will pay R200 billion to government in partial settlement of the GFECRA balances. 23
Of this amount government will pay the Reserve Bank R100 billion towards the contingency reserve
Source: National Treasury
In 2025/26, gross loan debt will peak, stabilising at 76.2 per cent of
GDP
Gross debt-to-GDP outlook*
77
76.1 76.2 75.9 • This is the result of a growing primary budget
75.1 surplus, meaning revenue exceeds non-interest
75
74.1 75.5 75.3 75.0 74.3 spending.
74.7
74.1 72.9 • Meanwhile, debt-service costs will peak in 2024/25,
Per cent of GDP

73
72.8 stabilising at 21.7 per cent of revenue, and decline
71.2
71 70.5 71.2 thereafter.
69.3
69 69.3
67.6
67.1
67
2024 MTBPS 2025 Budget 67.0
65
2025/26

2026/27

2027/28
2021/22

2022/23

2023/24

2024/25

2028/29

2029/30

2030/31

2031/32

2032/33

24
*2024 MTBPS estimates are reflected by the lower data labels
State-owned companies remain distressed due to weak governance,
finances and operations
• State‐owned companies remain distressed due to weak governance, financial pressures and ongoing operational challenges.
• Eskom is making progress on its recovery plan, although its finances remain weak and operational performance requires
significant improvement.
• Transnet is hampered by high debt levels and needs to make faster progress on its recovery plan to improve operations and
finances.
• Development finance institutions continue to support economic growth.
• Social security funds remain critical for social protection, with the Unemployment Insurance Fund and Compensation Fund
showing financial resilience.
• State-owned companies and major public entities continue to pose a large risk to the fiscal position.
• The 2025 Budget maintains government’s stance of not providing bailouts to state-owned companies.
• Government is focused on improving governance and the effectiveness and transparency of the guarantee framework.
• In addition, government will support critical capital investments through different mechanisms, including credit guarantees, on-
lending and grant funding, where appropriate.

25
 he Budget reaffirms government’s commitment to raising living
standards, growth and stabilising debt
• Government’s fiscal strategy is on track to strengthen the public finances. In 2025/26, public debt will peak, stabilising at 76.2 per cent of GDP
• Debt-service costs are forecast to peak as a share of revenue this year, declining gradually thereafter.
• Provinces need to improve the management of personnel costs, raise infrastructure investment and arrest the trend of rising accruals in the health and education
sectors.
• Municipalities face governance, accountability and capacity challenges, with persistent irregular expenditure, rising debt accruals and declining revenue generation.
• Significant reforms are under way to improve provincial and municipal performance.
• The 2025 Budget maintains government’s stance of not providing bailouts to state-owned companies.
• Risks to the fiscal outlook remain balanced. Medium- to longer-term risks to the fiscal outlook include:
• Lower economic growth, leading to weaker revenue growth.
• The poor financial condition of subnational governments and state-owned companies.
• Macro-fiscal shocks due to heightened geopolitical tensions.
• Determined application of the fiscal strategy, in concert with economic policy initiatives and a firm stance on state-owned company bailout requests, will mitigate
these risks.

26
Thank you

27
How has the change in the VAT proposal since 19 Feb affected the
Budget details?
• VAT rate increase from 15 per cent to 16 per cent over the two years is proposed
• Adjustments to the VAT rate proposal has required a reduction in the spending proposals and a different mix
of revenue measures.
• Additional mitigation from higher revenue estimates and smaller contingency reserve
• Changes on the spending side:
o Lower net increase in non-interest expenditure
o Lower contingency reserve
• Changes on the revenue side:
o Different mix of revenue measures
o Lower main budget revenue estimates
• Fiscal strategy remains on track. Debt stabilising primary surplus is achieved in 2025/26
• However, fiscal buffers are weaker, including due to a smaller contingency reserve.

28
What changed on the revenue side since 19 February 2025?
Revisions to main budget revenue estimates since 19 February 2025
R million 2024/25 2025/26 2026/27 2027/28 MTEF total
Revisions to gross tax revenue before tax proposals 2 634 4 034 3 900 4 010 11 945
Net impact of tax proposals (Revised) – 28 000 44 158 46 845 119 003
Net impact of tax proposals (19 February 2025) – 58 000 60 510 63 896 182 406
Revisions to net impact of tax proposals – -30 000 -16 352 -17 051 -63 403
Revisions to mineral and petroleum royalties projections -41 115 101 78 294
Revisions to SACU payments projections – – -135 -575 -711
Revisions to main budget revenue estimates 2 593 -25 850 -12 486 -13 539 -51 875

29
What changed on the non-interest spending side since 19 Feb 2025?
Revisions to main budget non-interest expenditure estimates since 19 February 2025
R million 2024/25 2025/26 2026/27 2027/28 MTEF total
Additions to baselines and provisional allocations – -6 214 -6 357 -7 383 -19 955
Social grants above-inflation increases – -4 682 -4 746 -5 649 -15 078
Provisional allocations for frontline services (Home Affairs) – -1 532 -1 611 -1 734 -4 877
Changes in contingency reserve – -3 000 -4 500 -3 873 -11 373
Change in main budget non-interest expenditure estimates – -9 214 -10 857 -11 256 -31 328
Source: National Treasury

30
Changes to the main budget fiscal framework since 19 February 2025
R million / per cent of GDP 2024/25 2025/26 2026/27 2027/28
Revenue 2 593 -25 850 -12 486 -13 539
Expenditure -8 504 -10 244 -9 859
Non-interest expenditure -9 214 -10 857 -11 256
Debt-service costs 710 613 1 398
Budget balance 2 593 -17 346 -2 242 -3 680
0.04% -0.22% -0.03% -0.05%

Primary balance 2 593 -16 636 -1 629 -2 282

0.03% -0.21% -0.02% -0.02%

31
The main budget fiscal framework in the 2025 Budget Review
2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28
Revised
R billion/percentage of GDP Outcome estimate Medium-term estimates
Revenue • The 2024/25 main budget deficit is projected at 4.7 per cent of GDP,
Gross tax revenue after proposals 1 563.8 1 686.7 1 740.9 1 846.3 2 006.1 2 163.5 2 306.2 compared with 4.3 per cent in the 2024 Budget, due to weaker
Non-tax revenue 40.4 51.0 43.9 31.9 36.4 31.7 31.7 growth and lower revenue.
SACU1 -46.0 -43.7 -79.8 -89.9 -73.6 -77.7 -91.8
National Revenue Fund receipts 6.1 5.2 19.0 9.2 1.5 0.9 0.5
Main budget revenue 1 564.3 1 699.2 1 724.0 1 797.6 1 970.5 2 118.4 2 246.6
• Relative to the 2024 MTBPS projections:
24.7% 25.1% 24.3% 24.0% 24.6% 24.9% 24.8%
Expenditure • Higher main budget primary surpluses and lower budget
National departments 822.8 855.9 826.9 862.3 912.8 910.2 943.9 deficits are projected in 2026/27 and 2027/28, as higher
Provinces 660.8 694.1 706.3 730.7 767.8 798.4 833.8 spending is more than offset by higher revenue.
Local government 135.6 150.7 157.7 167.7 176.8 185.1 190.8
Contingency reserve – – – – 5.0 5.5 11.1 • Debt‐service costs have been revised up by R12.1 billion over
Provisional allocations not – – – – 37.1 83.0 84.7
appropriated
the MTEF period.
Non-interest expenditure 1 619.2 1 700.7 1 690.8 1 760.7 1 899.5 1 982.3 2 064.4
Debt-service costs 268.1 308.5 356.1 389.6 424.9 449.2 478.6 • The deficit is expected to continue narrowing over the medium
Main budget expenditure 1 887.3 2 009.2 2 046.9 2 150.3 2 324.4 2 431.5 2 543.0 term, from 4.4 per cent of GDP in 2025/26 to 3.3 per cent by
29.8% 29.7% 28.9% 28.8% 29.1% 28.6% 28.0%
Main budget balance -323.0 -309.9 -322.9 -352.7 -353.9 -313.0 -296.4
2027/28.
-5.1% -4.6% -4.6% -4.7% -4.4% -3.7% -3.3%
Primary balance -54.9 -1.5 33.2 36.8 71.0 136.1 182.3 • Government proposes to maintain a R21.6 billion contingency
-0.9% -0.0% 0.5% 0.5% 0.9% 1.6% 2.0% reserve over the MTEF period to manage major unanticipated risks.
1. Southern African Customs Union. Amounts made up of payments and other adjustments. The estimates for the
32
next two years include projected forecast error adjustments for 2023/24 and 2024/25 respectively
Source: National Treasury