The National Assembly passed the Fiscal Framework of Budget 2025 that includes a 0.5% VAT increase that will kick in on 1 May, while the rand lost almost 30 cents during the day, taking it to R18.80/dollar.
It was clear that investor confidence in South Africa took a knock. With bond yields jumping by almost 40 basis points.
According to National Treasury, the budget includes a package of proposals for parliament’s consideration. Legislation provides for the inclusion of a fiscal framework, a Division of Revenue Bill and an Appropriation Bill.
Each of these must be considered in a sequential manner and parliament has now voted on the fiscal framework.
The Fiscal Framework contains government’s economic policy and the amount of tax it expects to earn as revenue, while it also sets the limits for how much government can spend. The Division of Revenue Bill indicates how the revenue will be spent at national, provincial and local government level.
The Appropriation Bill sets out how much government can spend on different priorities such as public servant salaries and interest on its debt.
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With Budget 2025 passed, consumers will pay more VAT and personal tax
With the Fiscal Framework passed, consumers can now get ready to pay 0.5% more VAT, while a few more food items will be added to the zero-rated basket.
Minister of finance Enoch Godongwana said in his Budget 2025 speech the old-age, disability and child support grants will be increased by an amount higher than expected inflation to mitigate the impact of the VAT increase on vulnerable households.
The basket of zero-rated items will also be expanded to include canned vegetables, edible offal and dairy liquid blends to provide further relief. The general fuel levy and RAF levy will also not be changed to limit cost-of-living increases.
There will also be no inflationary adjustment to personal income tax brackets, rebates and medical tax credits. Consumers can also get ready to pay above-inflation increases in excise duties on alcohol and tobacco products.
