Budget 3.0 Receives Positive Feedback: No Change in VAT, Fuel Levy Set to Rise Next Month

Cape Town – On Wednesday, Finance Minister Enoch Godongwana found success on his third attempt as his revised budget proposal gained approval from all key factions within the Government of National Unity.

After facing two prior rejections, Minister Godongwana highlighted that “a national budget extends beyond simple accounting; it encapsulates our revenues, expenditures, and national borrowing.”

“It embodies the tough choices essential for achieving fiscal sustainability while also pursuing our developmental goals.”

Following the outright rejection of a suggested 2 percentage point rise in Value Added Tax (VAT) on March 12, the minister explored alternative avenues to address the financial shortfall.

He proposed an inflation-adjusted increase in the general fuel levy.

“For the fiscal year 2025/26, this is the only new tax initiative I am proposing,” Minister Godongwana mentioned.

“This represents the first increase in the fuel levy in three years.”

“Commencing from June 4 this year, the general fuel levy will increase by 16 cents per litre for petrol and 15 cents per litre for diesel.”

“Unfortunately, this tax measure alone will not close the fiscal gap in the medium term.”

Nonetheless, Minister Godongwana asserted that his budget proposal supports sustainable finances, enhances the social wage, and encourages investments for economic growth.

“This is not an austerity budget. It raises non-interest expenditure by an average of 5.4 percent over three years,” he clarified.

“In real terms, this results in a 0.8 percent growth. It is also a redistributive budget.”

“61 cents of every rand of consolidated, non-interest expenditure is earmarked for the social wage.”

The finance minister indicated that this funding would benefit essential services such as free basic electricity, water, education, healthcare, affordable housing, and social grants for the vulnerable.

“This budget allocates over R1 trillion towards vital infrastructure aimed at boosting economic growth prospects and enhancing access to essential services,” Minister Godongwana revealed.

Consequently, the 2026 Budget will need to implement new tax measures targeting an additional R20 billion.

“We have designated an extra R7.5 billion over the MTEF to improve the efficiency of the South African Revenue Service (SARS) in revenue collection,” Minister Godongwana clarified.

“Part of this budget will focus on increasing collections from outstanding debts owed to the treasury.

“SARS has indicated that this could yield between R20 billion and R50 billion in extra annual revenue.”

He also noted that some of the supplementary allocation to SARS would be aimed at modernization initiatives.

“This includes targeting illicit trade in tobacco and other sectors, which is expected to enhance revenue in the medium term,” he said.

“As SARS utilizes this investment to generate additional revenue, which I believe could reach at least R35 billion, the R20 billion needed to address the current revenue gap won’t necessarily come from tax hikes.”

The minister called upon all South Africans—individuals, small business owners, and large corporations—to meet their tax responsibilities.

“We recognize the urgent need to enhance this undertaking,” remarked the finance minister.

“Our commitment to tax collection must be accompanied by greater efficiency in spending those funds.

“It should also involve much stricter oversight to promptly identify issues and deliver timely solutions when problems arise.”

“We are attuned to public concerns regarding waste and inefficiency in expenditures.”

In the absence of President Cyril Ramaphosa and Deputy President Paul Mashatile, Acting President Gwede Mantashe observed a peaceful budget presentation.

In response to the budget proposal, the Democratic Alliance, the second-largest party in the Government of National Unity, expressed that they “cautiously welcome the revenue and expenditure proposals in the Minister of Finance’s Budget Speech.

“We see this as a pathway to a National Budget that we hope to support during the vote.”

The GOOD party remarked, “The third version of Budget 2025, presented by Minister of Finance Enoch Godongwana today, successfully addresses a R69 billion fiscal deficit resulting from the proposed 0.5% VAT increase without sacrificing social and infrastructure investments.”

They added, “To some extent, this serves as a holding budget to manage the instability experienced since the initial budget was turned down in March.

“Real advancements lie ahead, particularly in eliminating waste and reforming the budget-making process.”

However, the budget proposal has drawn significant criticism from opposition parties, with the uMKhonto weSizwe Party and the Economic Freedom Fighters condemning it as an “austerity budget” and an “indictment against the poor” that fails to tackle economic inequality or foster job creation.