Budget 2025: South African Experts Weigh In on a Mixed Bag of MeasuresThe 2025 Budget Speech, delivered on March 12, 2025, has ignited heated debate across South Africa. From VAT hikes to unadjusted tax brackets, the implications for consumers, youth employment, education, and the broader economy are under the spotlight. Here’s what the experts say about the government’s latest financial roadmap.
A stealth tax hit on consumers
Jurgen Eckmann, wealth manager at Consult by Momentum, warns that while the VAT increase will grab headlines, another measure quietly erodes South Africans’ wallets. He says: “While the biggest debate from today’s Budget will no doubt centre around the VAT increase, the reality is that the Minister’s announcement regarding the personal income tax brackets not being adjusted for inflation also has severe implications on the consumer purse.” For the second consecutive year, this lack of adjustment means take-home pay will shrink, especially for those nudged into higher tax brackets by salary increases.
Eckmann says: “While there were no overt personal income tax increases, this lack of inflationary adjustment means South Africans will ultimately take home less – especially if their annual increase pushes them into a new tax bracket. Had the Minister adjusted the brackets, consumers would still pay more in tax but it would be in line with their increase.” He offers a stark example: “Let’s say someone earns R30,875 per month before tax (R370,500 per year). Should they receive a 7% inflationary annual increase from their employer, this will shift them into a new tax bracket. Without the Treasury providing for this and adjusting the brackets, this means that the person – who now earns R33,078.75 per month before tax – will now pay R83,419 in annual income tax, which is almost R10,000 more in tax than they would have paid the previous year (R73,726). So while their net salary would have increased by 5,65%, their tax bill would have jumped by 13.15%.” His advice? “With tax being a complex area for many individuals, it is always a good idea to chat to a qualified financial adviser who will help you navigate your tax affairs”.
Youth left out in the cold
Nkosinathi Mahlangu, youth employment portfolio head at Momentum Group, sees the Budget as a missed opportunity for South Africa’s youth. He says, “The 2025 Budget Speech was a critical turning point for South Africa, but it leaves us questioning how the youth will be meaningfully included in the economy because no hard and fast answers appeared to be given.” With over R380 billion earmarked for debt servicing, he doubts the government’s ability to create sustainable jobs, noting, “While Operation Vulindlela has initiated structural reforms, it’s unclear whether these will translate into lasting employment opportunities for youth or sustain small businesses in the long run”.
The R1 trillion infrastructure spend earns his approval but with a caveat: “Infrastructure spending of R1 trillion is commendable, but we must ensure that youth are not just passive participants. We must prioritise upskilling the next generation within the first year, aligning with essential sectors like transport and agriculture.” Projects like the Mkhomazi Water Project in 2027 and support for emerging farmers need urgent youth-focused plans, he argues.
Mahlangu also critiques the public sector’s early retirement scheme: “The public sector’s early retirement initiative should be paired with a strategy to bridge the experience gap with youth employment, ensuring these new opportunities translate into tangible skills development.” On education, he asks: “The call for more teachers is an opportunity to recruit unemployed graduates into the teaching profession, but are we actively encouraging youth to pursue this rewarding career path?”
The extension of the Social Relief of Distress (SRD) grant to March 2026 disappoints him: “While the SRD grant extension to March 2026 is a necessary stopgap, it’s disheartening to see no clear exit plan or transition to a basic income grant that will truly lift young people out of poverty.” With youth unemployment at crisis levels, he calls for more: “The youth need salaries, not handouts. If we are serious about tackling youth unemployment, we need comprehensive plans, like leveraging public-private partnerships, to create sustainable and inclusive jobs.
Education gains amid the pain
Arno Jansen van Vuuren, managing director at Futurewise, finds a silver lining in the Budget’s education commitments. He acknowledges the consumer squeeze but highlights the upside: “While the VAT hike announced today is sure to dominate headlines in the coming weeks – as well as the other measures that might be seen to hurt consumer finances, such as the lack of inflationary adjustments to personal income tax brackets (for the second year running) – it is important to keep in mind that the additional revenue generated will directly benefit vital sectors such as education”.
He praises specific wins: “The budget will ensure that 11,000 additional teachers remain in classrooms, while also boosting funding for Early Childhood Development, increasing the subsidy for young children to R24 per day while enabling ECD access for 700,000 more kids.” Reflecting on expectations set by the State of the Nation Address, he adds: “Following SONA, we were hopeful that these issues would be addressed in today’s Budget, and I believe this focused investment is essential to building a brighter, more equitable future for our children.”
VAT Hike: A Necessary Evil?
Ronald King, head of public policy and regulatory affairs at PSG Wealth, unpacks the government’s decision to raise VAT by 0.5% in 2025/2026 and another 0.5% in 2026/2027, pushing it to 16%. He explains, “In light of several new and persistent spending pressures, the Government has decided to raise additional revenue by increasing the VAT rate by 0.5% in 2025/2026 and by another 0.5% in 2026/2027, bringing VAT to 16% in 2026/2027. This will enable the funding of key public services such as education, health, and transport.”To ease the burden, King says: “Government has acknowledged that this increase will place greater pressure on households. However, the impact will be cushioned through above-inflation increases in social grants, an expansion of the list of zero-rated foods, and an extension of fuel levy relief.”
Alternatives like higher personal or corporate taxes were shelved due to their drag on growth, with King adding” “Raising corporate tax rates discourages investment and job creation and ultimately yields less revenue than increasing the VAT rate”. Yet, he flags risks: “It should be noted that an increase in the VAT rate would harm all households, in particular poor and low-income households, especially when viewed in the context of an environment of high real interest rates that continue to constrain demand in the economy.” Doubting zero-rating’s effectiveness, he cites Deputy Finance Minister David Masondo: “Suppliers did not pass on the benefit of the VAT relief to consumers as was intended.” King warns: “If economic growth is weaker than expected, spending behaviour will be adjusted and the growth in VAT revenue is likely to falter.”
A balancing act with mixed results
The 2025 Budget is a double-edged sword. It funds critical sectors like education and infrastructure, but experts like Eckmann, Mahlangu, Jansen van Vuuren, and King spotlight its flaws—higher taxes, youth exclusion, and economic uncertainty. As South Africans tighten their belts, the call for smarter, inclusive solutions grows louder. Whether this Budget charts a path to stability or deepens existing challenges remains to be seen.
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