READ: The Budget Speech 2025 that never was

Honourable Speaker, Thoko Didiza

Deputy Speaker, Annelie Lotriet

Chairperson of the National Council of Provinces, Refiloe Mtshweni-Tsipane

Deputy Chairperson of the National Council of Provinces, Les Govender

His Excellency, President Cyril Ramaphosa

Honourable, the Deputy President Paul Mashatile

Cabinet Colleagues

Members of the Executive Council for Finance

Honourable MembersGovernor of the South African Reserve Bank

Commissioner of the South African Revenue Service

Fellow South AfricansI have the honour to table the following documents before this House:

The 2025 Division of Revenue Bill;

The 2025 Appropriation Bill;

The 2025 Eskom Debt Relief Amendment Bill;

The 2025 Public Sector Pension and Related Payments Bill;

The 2025 Revenue Laws Amendment Bill;

The 2025 Estimates of National Expenditure;

The 2025 Budget Review; and

The 2025 Budget Speech.

INTRODUCTION

Madam Speaker, allow me to begin by paying tribute to the 14 members of the South African National Defence Force who lost their lives in a peacekeeping mission in the Democratic Republic of the Congo (DRC).

May their families find solace in the fact that they died in service of our country pursuing peace, security and stability in the region.

Recent geopolitical developments remind us that we must work hard to nourish national unity and greater social cohesion, whilst recognising that we are part of a global community.

As such, we must balance openness and autonomy, self-interest and cooperation, expediency and long-termism.

It is in this context that we fully support the National Social Dialogue set to happen later this year. Through this dialogue, we will strive to attain higher levels of social cohesion and develop a common programme to pursue our collective economic and national interests.

Turning now to today’s business: the 2025 Budget. This Budget reaffirms government’s commitment to raise living standards and improve our long-term economic prospects by prioritising infrastructure investment, continuing to implement economic reforms and increasing spending to address key service delivery priorities.

This is all while ensuring that we meet our key fiscal objectives to stabilise debt in the upcoming fiscal year and maintain a growing primary surplus.

In this way, the Budget gives expression to the Medium-Term Development Plan (MTDP), which seeks to:

• Drive inclusive growth and job creation

• Reduce poverty and tackle the high cost of living

• Build a capable, ethical and developmental state

ECONOMIC OUTLOOK

Global Outlook

Turning to the global outlook, the International Monetary Fund forecast global economic growth at 3.3 per cent in 2025. Global trade is expected to weaken from 3.4 per cent in 2024 to 3.2 per cent in 2025.

Rising geopolitical tensions, including the intensification of protectionism, could distort trade flows, disrupt global supply chains and reduce market efficiencies.

The prevailing conditions present risks for small open economies like South Africa.

Domestic Outlook

Domestically, economic growth remains below aspirations.

Real GDP growth is forecasted at 0.8 per cent in 2024. This is lower than the 1.1 per cent growth estimated during the 2024 MTBPS. The downward revision is due to weaker-than-expected outcomes in the third quarter of 2024.

Over the medium term, however, growth is forecast to average 1.8 per cent. This outlook is supported by higher investment and household consumption, aided by a stable inflation outlook, moderate employment gains and improving household balance sheets.

FOSTERING FASTER INCLUSIVE GROWTH

The truth is that we need much faster, more inclusive growth and job creation. To achieve this, our economic growth strategy remains anchored on four pillars.

Honourable Members, let me remind you of these.

Pillar one is about maintaining macroeconomic stability. This promotes stable prices and lower interest rates and enhances the country’s resilience to external shocks. Combined with prudent fiscal policy, this creates a conducive environment for investment.

Pillar two is focused on building state capability, by rebuilding public institutions, boosting productivity, and using digital transformation to improve service delivery.

Allow me to expand on the remaining two growth pillars.

Pillar three is concerned with implementing structural reforms, to remove impediments to growth, and create a solid foundation for a high and sustained economic growth. Operation Vulindlela, a joint effort between the Presidency and the National Treasury, has been a catalyst in this regard.

Since its establishment in 2020, regulatory changes enabled private sector investments in renewable energy, unlocking billions of Rands in new investment. OV measures have created a 22,500 megawatt pipeline of projects with an estimated value of R390 billion.

In data costs, interventions have led to the reduced cost of a 1.5GB data bundle by 51 percent. The number of days to obtain a water use license has been reduced from 300 to 90.

To boost tourism, we have introduced an e-Visa for travellers from 34 countries. These reforms were supported by the passing of new legislation, namely:

• The National Water Infrastructure Agency Act
• The Electricity Regulation Amendment Act
• The Economic Regulation of Transport Act

These Acts have greatly facilitated the crowding-in of private sector investments in key sectors.

Building on earlier successes, Phase 2 of Operation Vulindlela continues to implement the policy and regulatory reforms that were made in the transport, water, energy, and visa systems.

These include implementing institutional reforms to improve the management of water resources. We will also focus on strengthening the regulation of water services through the introduction of a licensing regime.

These changes enable new financing opportunities for the construction of dams and pipelines, and in the case of distribution services, will require providers to be licensed to retain water in our taps and to stop leaks.

Phase 2 will also focus on reforms to the electricity distribution industry. The aim is to establish financially and operationally sustainable distribution companies and to strengthen and expand the national transmission network.

In transport, the priority is implementing the freight logistics roadmap. This includes getting private sector participation and giving non-discriminatory, third-party access, as per the network statement in freight rail.

Further reforms to attract skills and boost tourism include:

• Implementing a remote work visa
• Expanding the trusted employer scheme
• Broadening the e-Visa system
• Implementing an electronic travel authorisation for tourist visas

Madam Speaker, Phase 2 will also look at expanding digital public infrastructure.

It will also concentrate on transforming our towns and cities into more inclusive, productive, and efficient spaces and strengthening local government to better the delivery of services.

In terms of local government, reforms to turn around the water and sanitation, electricity, and waste removal businesses in cities include wide-ranging institutional changes.

The goal is to create a single point of management accountability and ring-fencing the revenue to increase investment in infrastructure.

Creating dynamic cities to support economic growth and reduce inequality must include reviving commuter rail services. It also entails supporting housing finance by unlocking dead assets through accelerating the issuing of title deeds.

A roadmap for digital transformation will be finalised in the next month to drive the implementation of a digital identity for secure and remote access to government services and to establish a data exchange for evidence-based policymaking.

Madam Speaker, South Africa’s industrial capacity was developed on the back of cheap electricity. The high and rising rates of electricity are having a negative impact on the viability of our industrial base, in particular the smelters.

A committee of four Ministers has been set up and will be led by Minister Mantashe to look into these matters and better understand how the government can work with key industry players to address these obstacles to industrial development.

Infrastructure

Let me now turn to pillar four of the growth plan, which encompasses supporting public infrastructure investment through greater private sector participation, capital budgeting reform, and alternative infrastructure financing.

During the 2024 MTBPS, I said that the new regulations for public-private partnerships (PPPs) would be finalised. And indeed, these have now been published and will take effect on 1 June 2025.

Under the new rules, projects below R2 billion are exempted from some Treasury approvals, which will accelerate their development. The role of the PPP unit is being expanded to provide proactive support in planning and procurement. This will lead to projects reaching financial closure faster.

We have clarified the framework for unsolicited bids, and we have also implemented mechanisms to strengthen the governance of fiscal risk.

The new regulations also make provision for national departments to establish sector-specific PPP units. This is modelled after successful programmes like the Independent Power Producers (IPP) Office and will allow individual units to manage public-private projects within their domains.

Private sector participation (PSP) creates opportunities to optimise the balance sheets of financially distressed state-owned companies.

The Department of Transport and Transnet will, in the next two months, engage the market on PSP projects in the following areas:

• The ore, chrome, coal, and manganese lines.
• Expansion and automation of the ferrochrome and magnetite terminal at the port of Richards Bay.
• The container and automotive sectors, including the potential designation of the SA container port system as a regional trans-shipment hub for major shipping lines.
• The establishment of an independent rolling stock leasing company.

Should Transnet require gap funding for its PSP projects, the Budget Facility for Infrastructure (BFI) will consider these after proper packaging and financial structuring. Additional guarantees may also be considered to refinance the entity’s maturing debt as well as operational requirements.

In the energy sector, the Independent Transmission Project will be launched later this year. A request for information for a multi-line package will also be issued by the IPP Office in July, followed by a request for proposals in November. These will enable the private sector to invest in the expansion of the transmission network.

Alongside reforms to attract private sector participation, the delivery of infrastructure is being accelerated through additional allocations in the budget.

Capital payments—money allocated for the purchase or upgrade of long-term assets like buildings, machinery, and equipment—are the fastest-growing area of spending by economic classification. Over the next three years, public infrastructure spending amounts to more than R1 trillion.

This demonstrates our commitment to leveraging infrastructure as the bedrock of economic development, a key source of jobs, and an avenue to scale up service delivery.

Current infrastructure investment focuses on three critical sectors:

• R402 billion for transport and logistics.
• R219.2 billion for energy infrastructure.
• R156.3 billion for water and sanitation.

The South African National Roads Agency (SANRAL) will spend R100 billion over the medium term.

This will double the number of kilometres of roads kept in active resurfacing contracts, from 950 kilometres in 2024/25 to 2,000 kilometres in 2025/26. It will also enable them to keep the 24,000-kilometre network in active maintenance.

SANRAL will increase the strengthening and improvement of the network from 200 kilometres in 2024/25 to 400 kilometres by 2026/27.

Provincial roads departments will reseal over 16,000 lane-kilometres of roads in their areas of authority. These projects benefit the construction sector and therefore support our efforts to boost employment.

The construction sector has the highest employment multiplier. Every R1 million spent on a construction project creates more than three jobs for individuals whose highest qualification is a matric certificate.

Construction on the Mkhomazi Project is expected to commence in November 2026, transferring water to the Mngeni Water Supply System. This will increase the total capacity of the system to 5 million households in eThekwini and four district municipalities in KwaZulu-Natal.

While we have made good progress on our infrastructure reform agenda, a key question remains: Are we getting value for money out of our investment?

In other words, how do we ensure that our infrastructure is delivered on time, on budget, and to specifications?

We will focus on this question over the next few months, and I intend to make concrete recommendations to Cabinet in this regard by the time we table the MTBPS in October this year.

Madam Speaker, our efforts to diversify the financing strategy to support infrastructure are taking shape.

A credit guarantee vehicle will be launched in the first half of 2026, with an initial focus on transmission pilot projects. Once the vehicle has demonstrated its efficacy, it is expected to broaden its operation to other sectors.

Lastly, we have reconfigured the Budget Facility for Infrastructure (BFI) to run multiple bid windows. The BFI provides viability gap funding for infrastructure projects following an extensive screening process.

Under this new regime, project submissions will be evaluated quarterly rather than annually. Financing decisions to determine the appropriate fiscal mechanism to support projects have been separated from the evaluation and budget processes.

This will ensure that there is a continuous pipeline that can be used to mobilise non-fiscal funding. A circular on the new arrangements will be published next week.

National Health Insurance

Madam Speaker, a key element of rolling out National Health Insurance (NHI) is the provision of infrastructure that is reliable and fit for purpose.

Currently, several of our hospitals do not meet this threshold. The move from one to four BFI bid windows will fast-track the process of preparing projects for consideration, allowing, for instance, upgrades to hospitals to be delivered in a more efficient fashion.

Fiscal Strategy and Outlook

Madam Speaker, we recognise the interconnected nature of these four growth pillars. Improved state capability enables better infrastructure delivery, which in turn supports structural reforms and macroeconomic stability.

Together, these lay a solid foundation for faster, labour-intensive growth.

Honourable Members, our fiscal strategy remains on track. This Budget reaffirms the government’s commitment to raising living standards, expanding infrastructure investment, and stabilising debt.

At the same time, it maintains support for low-income and vulnerable households.

As projected in the 2024 Medium Term Budget Policy Statement (MTBPS):

• A budget primary surplus of 0.5% of GDP will be achieved this financial year.
• This will more than double in 2025/26 to 1.1% and will eventually reach 2% by 2027/28.
• Government debt will stabilise at 76.1% of GDP.

The consolidated budget deficit will narrow from 5% of GDP in 2024/25 to 4.4% in 2025/26. By 2027/28, it is estimated to narrow further to 3.4% of GDP.

Madam Speaker, these are important milestones towards achieving our goal of fiscal sustainability.

As a result of our efforts, debt-service costs, which consume 22 cents of every rand of revenue raised, are also coming down. They will peak in the current financial year and decline thereafter.

Our Eskom debt relief arrangements are showing positive results. Eskom is now in a much better financial position than when the debt relief was first announced. Due to these improvements, we have simplified the final phase of the debt relief package. Instead of the final R70 billion debt takeover, we will allocate R40 billion in 2025/26 and R10 billion in 2028/29, leading to a total saving of R24 billion.

To maintain fiscal sustainability, we will continue to anchor fiscal policy with a debt-stabilizing primary surplus over the medium term.

Revenue and Tax Proposals

Madam Speaker, since October, new spending pressures have emerged in health, education, transport, and security. To meet these demands, we had three choices:

1. Continue cutting funding for essential services.

After careful consideration, we have chosen the most responsible path: a 2 percentage point increase in the VAT rate to 17%. This will enable us to:

• Fund public sector wage increases.

• Expand early childhood development.

• Retain teachers, doctors, and essential frontline workers.

We thoroughly analysed alternatives, including corporate and personal income tax increases, but these would generate less revenue and harm job creation. Taking on more debt, given our junk credit rating, would increase interest payments and risk further downgrades. The VAT increase is the most efficient, broad-based solution, aligning with global standards while ensuring social protections and infrastructure investments.

Recognising cost-of-living pressures, we are implementing relief measures, including:- Expanding VAT zero-rated food items (e.g., tinned vegetables, dairy liquid blends, and variety meats).- Extending fuel levy relief for another year, saving consumers R4 billion.- Providing above-inflation social grant increases.- Adjusting personal income tax brackets to protect lower-income earners.

These tax measures will generate R58 billion in additional revenue for 2025/26 while balancing fiscal responsibility and social protection.

Spending Priorities

To regain public trust, we must deliver efficient services, such as reliable trains, improved healthcare, and quality education. Reforms to the budget process will eliminate inefficiencies and waste. The 2025 Budget includes a net increase of R173.3 billion in non-interest expenditure over three years, funded entirely by the new tax revenue. Key allocations include:

• Infrastructure investments: R46.7 billion for urban rail revitalization, health, water, transport, student housing, and municipal services.

• Education: R19.1 billion to retain 11,000 teachers.

Municipal Debt and Performance-Based Funding

Municipal debt remains a critical challenge. Currently, 47 municipalities are defaulting on Eskom payments despite receiving debt relief. Compliance has improved, with 11 more municipalities qualifying for one-third debt write-offs. To assist struggling municipalities, we urge:

• Implementing cost-reflective tariffs.

The local government equitable share will rise from R99.5 billion in 2024/25 to R115.7 billion in 2027/28. A performance-based funding model will be introduced for municipalities that submit turnaround strategies for water and electricity services.

Disaster Risk Financing

South Africa faces increasing climate-related disasters, yet our current disaster management system is reactive rather than proactive. A new financing strategy will allow municipalities to access multiple funding sources, including:

• Budget reserves.

The Budget allocates R1.7 billion for future disaster response and R4 billion for backlog recovery efforts.

Conclusion

This budget prioritises institutional strengthening, service delivery, and economic stability. Effective governance, fiscal responsibility, and targeted investments are essential for sustainable growth. Our leadership in the G20 reflects South Africa’s commitment to global economic justice and multilateral cooperation.

Madam Speaker, I extend my gratitude to the President, Deputy President, Cabinet colleagues, National Treasury team, SARS Commissioner, Reserve Bank Governor, and my family for their support.

I thank all South Africans who continue to pay their taxes, reinforcing our shared commitment to national prosperity.

ENDS