Vat Set To Increase To 16 By 2026/27

Finance Minister Enoch Godongwana opened his budget speech with a public apology to both Parliament and the people of South Africa, acknowledging the delays in the presentation of the national budget, Cape town Etc reports.

He referred to the postponement as 'a regrettable but perhaps understandable feature of multiparty governance.'

In his address, Godongwana provided a blunt overview of South Africas economic situation, stating that the country's economy has stagnated for over a decade. He pointed out that, over this period, GDP growth has averaged less than 2, far below the levels needed to meet the growing demands of the country. 'The truth is that our economy has stagnated for over a decade,' Godongwana stated, emphasising the urgent need for economic growth.

One of the key proposals announced in the budget was a VAT increase. For those looking ahead, the finance minister proposed an increase in the VAT rate by 0.5 in 2025/26, followed by another half-point hike in the subsequent year. This would raise the VAT rate to 16 by 2026/27.

Godongwana also issued a stark warning about South Africa's growing sovereign debt. He revealed that debt-service costs would amount to R389.6 billion in the current financial year, translating to 22 cents of every rand raised in revenue. This, he said, is more than the governments combined expenditure on health, police and basic education. The government's strategy to alleviate some financial strain includes reducing debt relief to Eskom, aiming to save R20 billion over two years.