Finance Minister Enoch Godongwana is facing tough fiscal decisions ahead of the Budget Speech 2025, with mounting speculation that the SASSA SRD Grant could be discontinued to avoid an increase in value-added tax (VAT). The minister has confirmed that no additional budget cuts will be made, leaving tax increases or expenditure adjustments as the only viable options to bridge the estimated R60 billion revenue shortfall.
No VAT Hike If SASSA SRD Grant Is Scrapped
In an interview with the Sunday Times, Godongwana stated that a VAT increase would not be necessary if the Social Relief of Distress (SRD) grant was removed. The grant, introduced as a temporary relief measure during the COVID-19 pandemic, has been extended multiple times despite ongoing concerns about its affordability.
“If you allowed me to cut the SRD, I wouldn’t increase anything. I’m faced with increased expenditures which are not in the budget,” said Godongwana.
His remarks come as political parties within the Government of National Unity (GNU) strongly oppose the proposed VAT hike to 17%, arguing that it would disproportionately affect the poor.
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Political Disagreements Over Budget Proposals
Godongwana’s proposal to increase VAT by 2% was met with resistance within the GNU, despite prior discussions within the ANC leadership. The backlash has reportedly caught him off guard, given that President Cyril Ramaphosa and senior ANC officials had initially backed the proposal—on condition that the zero-rated basket be expanded to shield low-income households.
To gain parliamentary approval for the Budget 2025, speculation is rife that the ANC may seek support from the Economic Freedom Fighters (EFF) if no consensus is reached within the GNU.
Alternatives to Raising VAT
The National Treasury has explored various alternatives to increasing VAT, including:
- Corporate Tax Increases – However, this could discourage investment and job creation, ultimately reducing revenue in the long term.
- Personal Income Tax Adjustments – A less effective solution due to its limited ability to generate sufficient revenue.
- Increased Government Borrowing – This would push up interest rates and strain the economy further.
Despite these considerations, the proposed VAT increase remains the most efficient option for raising revenue without significantly disrupting economic growth.
Godongwana Rules Out Additional Budget Cuts
With government expenditure already stretched, Godongwana has categorically ruled out any additional budget cuts, warning that doing so would negatively impact service delivery. He also dismissed the possibility of increasing corporate taxes, as this would weaken business confidence and investment.
DA’s Alternative Budget Proposals
The Democratic Alliance (DA) has rejected any proposed tax hikes, instead advocating for stringent austerity measures to balance the budget. Their proposals include:
- Cutting travel and catering expenses across government departments.
- Implementing a hiring freeze for all non-essential government positions for 12 months.
- Reducing government advertising costs to minimize wasteful expenditure.
- Conducting a national audit of ‘ghost employees’ to eliminate fraudulent salaries.
- Reallocating funds through adjustment budgets throughout the year to improve efficiency.
Budget Speech 2025: Key Takeaways Ahead of Godongwana’s Address
With the 2025/2026 National Budget Speech set to take place on Wednesday, all eyes will be on Godongwana as he outlines South Africa’s fiscal policy for the upcoming financial year.
The fate of the SASSA SRD Grant remains uncertain, and its potential removal could have significant social and political implications. Meanwhile, the ongoing dispute over the proposed VAT hike underscores deeper divisions within the GNU on how best to address the country’s fiscal challenges.
As the Budget Speech 2025 unfolds, South Africans will be eager to see whether Godongwana sticks to his stance on the SRD grant or if last-minute negotiations lead to alternative solutions.
ALSO READ: Expanded SASSA SRD Grant: A Lifeline for the Poor or a Risk to Fiscal Stability?
The Budget Speech 2025 is shaping up to be one of the most consequential in recent years. The decision to scrap the SASSA SRD Grant or proceed with a VAT hike will have far-reaching implications for the economy, businesses, and vulnerable citizens. Regardless of the outcome, one thing is certain—South Africa’s fiscal policy is at a crossroads, and the government’s next move will set the tone for economic recovery and stability.
