- No VAT Increase – But Are You Still Paying More?
- Third Round of Budget Speech Finally Delivered as Hidden Costs Hit South Africans
22 May 2025: After two failed attempts and weeks of political wrangling, Finance Minister Enoch Godongwana finally delivered the third iteration of the 2025 National Budget Speech on Wednesday, 21 May. While many South Africans breathed a sigh of relief at the announcement that the proposed VAT increase had officially been scrapped, the true cost of this budget might not be as comforting as it seems.
Speaking after the speech, Sebastien Alexanderson, Head of National Debt Advisors, cautioned consumers to look beyond the headlines. “No VAT increase sounds like a win, but when you dig deeper into the numbers, the financial strain on households is still very real,” he said.
Hidden Costs Behind the Relief
Although VAT will remain at 15%—a move that Minister Godongwana says reflects the government’s commitment to listening to the public—the budget makes up for lost revenue in less obvious ways. These include:
- Fuel Levy Hike: Starting 4 June 2025, fuel levies will increase by 16 cents per litre for petrol and 15 cents for diesel, ending a three-year freeze. With total fuel taxes now accounting for 30–33% of the pump price, this is a direct hit on transport costs, which in turn affects the price of food and goods.
- Bracket Creep: Personal income tax brackets have been left unadjusted for inflation, which means that even if you didn’t get a raise, you could be taxed more. Known as “bracket creep,” this silent tax increase reduces your real income without changing the tax rate.
“People might not feel it immediately, but over the next few months, the rise in fuel costs and the bracket creep will slowly erode their purchasing power,” said Alexanderson. “It’s a hidden burden, especially on the working class who are already walking a financial tightrope.”
Pressure on Households
The government expects to raise R18 billion this year from these indirect tax measures. Yet, South African consumers—already stretched by high interest rates and sluggish economic growth—will bear the brunt. “It’s not just about what you pay at the till,” Alexanderson noted. “It’s about your rent, your transport, your grocery bill—all creeping up while your salary stays the same.”
This is particularly concerning given that South Africa’s economy is projected to grow by just 1.4% in 2025, down from the 1.8% forecast in March. At the same time, debt servicing costs are ballooning, and the national debt-to-GDP ratio is expected to peak at 77.4%—a warning sign that the room for economic manoeuvring is shrinking.
CLICK HERE to submit your press release to MyPR.co.za.
Author: Omega Ngema from Financial Wealth Capital on behalf of National Debt Advisors.
Submit your Press Release for free to MyPR here: MyPR Free Press Release Submission.