The upcoming 2025 National Budget remains a topic of intense political negotiation, with no final agreement reached among key government partners. Democratic Alliance (DA) leader John Steenhuisen confirmed that discussions are ongoing and that a resolution is expected by 12 March 2025.

The Key Sticking Point: VAT Hike

The primary disagreement in budget negotiations stems from a proposed Value-Added Tax (VAT) increase. While the African National Congress (ANC) and National Treasury advocate for some form of VAT hike, the DA and other coalition partners firmly oppose it. Reports indicate that the ANC has also been in discussions with the Economic Freedom Fighters (EFF) to push through a more moderate VAT increase of 0.75 percentage points.

Cabinet's Role in Budget Approval

A special cabinet meeting on 3 March 2025 was held to discuss budget funding options. The Presidency stated that cabinet input had been finalized, but it remains unclear whether all coalition partners agree. The responsibility now lies with Finance Minister Enoch Godongwana and National Treasury to finalize the budget.

Cabinet discussions focused on:

• The country’s fiscal constraints.
• Strategies to minimize the impact on lower and middle-income households.
• Supporting economic growth while maintaining public spending commitments.

Parliamentary Challenges Ahead

Neil Coleman, senior policy specialist at the Institute for Economic Justice, noted that without cabinet consensus, the final budget decision will likely lead to intense debates in Parliament. The DA has vowed to oppose any VAT increases, with DA finance spokesperson Dr. Mark Burke criticizing the ANC’s approach, labeling it a “reckless gamble”.

According to Burke, the proposed VAT increase would further strain South African consumers who are already financially burdened. He also condemned the ANC’s talks with the EFF, calling it an attempt to bypass coalition agreements.

Potential Economic Impact

While National Treasury seeks solutions to fund the 2025/26 budget, concerns remain regarding:

• The effect of a VAT increase on consumer spending.
• The impact on business confidence and investment.
• Alternative revenue options, such as corporate tax adjustments or public expenditure cuts.

What Happens Next?

With the budget announcement set for 12 March 2025, South Africans can expect heated parliamentary debates. Businesses and consumers should prepare for potential tax policy changes that may influence financial planning for the coming fiscal year.

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