BUDGET 2025/26: POLICY AND LEGISLATIVE IMPLICATIONS

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BUDGET 2025/26: POLICY AND LEGISLATIVE IMPLICATIONS

• 12 March 2025
• Parliament
• SA Legal Academy

Please note: In anticipation of parliamentary hearings on 25 March 2025, the National Assembly and NCOP Committees on Finance have issued a joint notice calling for written submissions on fiscal framework and revenue proposals tabled with the 2025/26 Budget. The deadline for input is 24 March 2025.

SA Legal Academy brings you key takeaways from the 2025/26 Budget speech. This is noting that:

• our summary excludes commentary
• mainstream media reports are likely to focus on the 0,5% VAT increase (hence our decision not to provide any details on the thinking behind this move), and that
• the speech itself includes what have, over the years, become customary references to ongoing post-apartheid developmental and service delivery imperatives (together with social wage-related spending, these are therefore excluded from this summary).

EXPENDITURE

Eskom

• the debt relief package‘s final phase has been ‘simplified’:
  • ‘the last R70bn debt takeover will … be replaced with R40bn in 2025/26, and
  • ‘R10bn in 2028/29 (resulting in ‘a saving for … government of about R20bn).

public infrastructure

• the R1tn allocated for the next three years will be divided between:
  • transport and logistics (R402bn)
  • energy (R219.2 bn), and
  • water and sanitation (R156.3 billion).

public-private partnerships (PPPs)

• ‘the new regulations … will take effect on 1 June 2025’ and, by enabling national departments to establish sector-specific PPP units, are expected to:
  • ‘reduce the procedural complexity of undertaking PPPs’
  • ‘create capacity to support and manage PPPs’
  • ‘create clear rules for managing unsolicited bids’, and
  • ‘strengthen fiscal risk governance’
• ‘a credit guarantee vehicle … (to) be launched in 2026’:
  • is expected to ‘mobilise private sector capital by derisking projects’
  • will focus initially on ‘independent transmission aimed at bridging the energy transmission deficit’, and
  • over time ‘will be broadened to include other sectors’
• other financing instruments are expected to include:
  • an infrastructure bond (to be launched ‘in 2025/26’), and
  • ‘innovative financing instruments (intended) to diversify … infrastructure funding sources (‘financial institutions including pension funds, banks, development banks and international financial institutions have already expressed interest in participating’).

REVENUE

• The following measure are expected to raise ‘R28bn in additional revenue in 2025/26 and R14.5bn in 2026/27’:
  • a half-a-percentage-point increase proposed for 2025/26, and
  • a further half-a-percentage-point proposed for 2026/27 (bringing the VAT rate to 16% in 2026/27, while
  • it is proposed that there should be ‘no inflationary adjustments to personal income tax brackets, rebates and medical tax credits’.
• public sector wage agreement medium-to-long-term savings:
  • while the recent three-year wage agreement exceeds 2024 Budget and MTBPS projections, it is nevertheless expected to reduce ‘uncertainty in budget planning’
  • this is noting that, although fulfilling the agreement will cost an additional:
    • R7.3bn in 2025/26
    • R7.8bn in 2026/27, and
    • R8.2bn in 2027/28,
  • the R11bn ‘provisionally allocated over the next two fiscal years for the early retirement initiative’ is expected to:
    • ‘attract younger employees into the public service’ resulting in ‘preliminary savings’ of approximately ‘R7.1 bn per year over the medium-to-long term’, and
    • ensure that ‘when key frontline staff are lost through natural attrition and retirement, (affected) sectors are able to fill vacant posts ... (and) keep services running effectively’.

financial management

With the aim of reducing national and provincial ‘wasteful and inefficient expenditure’, a ‘consolidated’ report with recommendations emerging from a 12-year ‘re-evaluation of the operations of government’ and associated ‘spending reviews’ will be taken to Cabinet shortly. Once approved and implemented, the recommendations are expected to address:

• ongoing ‘inefficiencies, misalignments, duplications and, in some cases, the continued funding of programmes that do not yield the intended impact’, among other things by:
  • strengthening the ‘administrative functions’ of dealing with ‘office accommodation, fleet management and overtime pay in various sectors’, and
  • ‘measuring the effectiveness of service delivery programmes in health, education and human settlements’.

‘The President has also undertaken to establish a committee between (in which) the Presidency and Treasury ... (will) identify waste, (along with) inefficient and underperforming programmes.

Please click the links below for additional information:

• speech
• 2025/26 Budget documents, including the now tabled:
  • Revenue Laws Amendment Bill
  • Division of Revenue Bill
  • Appropriation Bill
  • Public Sector Pension & Related Payment Bill
  • Eskom Debt Relief Bill

Published by SA Legal Academy Policy Watch

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