Godongwana trims state spending

The finance minister said in his budget that government debt would still stabilise this year but at 77.4% of GDP, higher than predicted in March

- Emsie Ferreira

n the new 2025 budget tabled on Wednesday, Finance Minister Enoch Godongwana trimmed additional spending allocations for frontline services and social grants made in March to mitigate the revenue shortfall created by his about-turn on raising VAT.

Proposed additional spending over the medium-term has been reduced from R232.6 billion to R180.1 billion, the minister said, while the country's gross borrowing requirement for the year has increased from R5.82 billion in March to R5.88 billion

Although the departments of health, education, home affairs and defence will still see their budgets grow, the increases will be smaller.

Following the exclusion of VAT increases that were in the two earlier budgets Godongwana presented this year, grant increases that had been designed to shield recipients from the effect of VAT increases will now fall away.

So too will plans to give more money to disaster management services, and while the Passenger Rail Agency of South Africa had been due to receive an additional R19.2 billion over the medium term, this sum has been reduced to R12.3 billion.

Godongwana also revised his growth forecast downwards, citing greater domestic risks, an expected downturn in global trade growth amid tariff instability and slower expansion prospects in both advanced and developing economies, dampened by the weakened outlook in the United States.

"South Africa’s real GDP growth is now forecast to be 1.4% in 2025, compared with 1.9% projected in March 2025."

He said he expected growth to increase modestly to 1.6% in 2026 and 1.8% in 2027.