Finance Minister Enoch Godongwana’s 2025 National Budget 3.0 has been carefully calibrated to maintain political harmony within the Government of National Unity (GNU), but risks remain.
“This is no DOGE-style chainsaw budget,” says Mike van der Westhuizen, Portfolio Manager at Citadel. “It’s a safe budget and they’ve done enough – for now. But the real story lies in what’s been left out, not what’s included, and it faces risks, if the fiscally expensive Social Relief of Distress (SRD) grant becomes permanent, or if the growth that it is intended to stimulate does not materialise,” says Van der Westhuizen.
While the budget maintains fiscal consolidation and avoids austerity, Van der Westhuizen notes that spending reductions merely reverse earlier expansions seen in Budget 1.0.
SRD grant
A key concern is the Social Relief of Distress (SRD) grant, which has been extended to March 2026 without any long-term funding plan. “A court ruling could compel government to make the SRD grant permanent and expand its reach, ballooning the cost from R35 billion to over R66 billion annually,” cautions Van der Westhuizen. “None of this has been budgeted for in the outer years.”
Other omissions from the 2025 National Budget 3.0 to note
Budget 2025 leaves out several items that could pose fiscal risks in the near future, especially if they are added back in during the medium-term budget or next annual budget, says Van der Westhuizen. “There is also no mention of National Health Insurance (NHI), likely due to affordability concerns. In addition, several spending pressures have been deferred rather than resolved, including support for Transnet’s debt refinancing, the gap left by the withdrawal of key donor funding (such as from USAID’s PEPFAR programme), funding for the Passenger Rail Association of SA (PRASA) proposed rolling stock fleet renewal, infrastructure pipeline projects, population-driven provincial allocations, political party funding, and resources for key institutions like the Office of the Chief Justice and Statistics SA. “These omissions represent a significant risk if any of them materialise later this year without a matching revenue plan.”
No VAT hike but tax pressures remain
Consumers may feel temporary relief from the decision to keep VAT at 15%, but the budget quietly introduces other tax pressures. “There’s been no inflation adjustment to personal income tax brackets, which effectively increases the tax burden on individuals,” says Van der Westhuizen. A modest fuel levy hike kicks in from June, and further tax changes are expected in the 2026 Budget to plug an estimated R20 billion revenue gap.
A temporary fix in a fragile system
The 2025 National Budget 3.0 is politically pragmatic and avoids market shocks – but it’s not without vulnerabilities. “Unless growth improves and spending pressures are permanently resolved, the risks will only grow,” Van der Westhuizen concludes. “It’s a fine balancing act, and right now, the balance remains precarious.”
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