Introduction

The Budget Justice Coalition (BJC) has conducted a detailed analysis of the revised 2025/26 budget and recognises it as a crucial opportunity to break from years of harmful austerity and a move towards a more inclusive economy. While the proposed expenditure increases mark a step in the right direction, the regressive revenue measures in the budget risk deepening inequality and worsening financial hardship for millions of South Africans. Furthermore, public sector investment must form part of a sustained commitment to rebuilding and adequately funding essential public services. Importantly, real increases in expenditure are inadequate if they do not align with policy priorities and constitutional obligations. A well-resourced public sector is fundamental to economic growth and social equity. Parliament now has a critical role in ensuring that the budget prioritises the needs of the most vulnerable and lays the foundation for a more just and inclusive future.

As the BJC, we propose a set of recommendations that will enable fiscal policy that is passed to contribute to inclusive economic development and the alleviation of hardships faced in our country. 

Furthermore, the BJC understands that this Committee has the power to pass, amend or reject this budget. Equally, we recognise that it must work with the timeframes prescribed by the Money Amendment Bills and other legislation. We will be making submissions on the DoRB and the Appropriation Bill to further advocate for progressive amendments to the 2025 budget, and additional reforms to take forward. Here, we put forward additional recommendations:

1. The impacts and implications of the proposed VAT increase have not been sufficiently interrogated. Given concerns about the conflicting processes of the tax amendments and the budget, we recommend that the VAT increase is halted until the National Treasury demonstrates that alternatives have been thoroughly interrogated and impacts mapped.
2. To uphold the increased social spending should the VAT increase be halted for re-assessment, we recommend that the Government Employment Fund pension contribution freeze be a stop-gap measure for the 2025/26 year while the alternative revenue raising measures are investigated.
3. The extensive use of provisional allocations should be reviewed to ensure that all allocations are subject to parliamentary law-making and oversight.  
4. Government must strengthen its overall revenue collection capacity to ensure greater fiscal sustainability. Even a modest improvement in recovering a portion of the estimated R800 billion in uncollected tax debt could generate more revenue than what is projected from the VAT increase, without placing additional strain on low-income households.
5. In addition to other alternatives proposed, we recommend that the committee investigate the potential to unlock funds in the Criminal Assets Recovery Account (CARA) to fund SARS and the anti-corruption system (NPA, SIU, and SAPS).
6. The Committee must ensure that spending reviews are inclusive and participatory, incorporating input from ordinary South Africans, civil society organisations working with affected communities, and other key stakeholders. Proposals must explicitly state the impact on rights realisation and incorporate participatory Human Rights Impact Assessments.
7. There is an urgent need to rethink macroeconomic and fiscal policy to support inclusive growth, rights realisation and nation-building. While this cannot be resolved within the timeframe for passing the fiscal framework, we urge the Committee to support a meaningful, policy-oriented consultation on these issues.
8. Cross cutting issues such as youth unemployment and gender responsive budgeting must be prioritised within the fiscal framework, along with issues not included in these submissions such as climate change, corruption and state capabilities.

Our submission aims to highlight persistent challenges, and failure in the existing frameworks that hinder growth and violate constitutional rights.

Fiscal Framework

The fiscal framework in South Africa must be underpinned by the country’s Constitution, which serves as the supreme law guiding the country’s governance and ensuring that the principles of democracy, equality, and social justice are upheld. 

The Constitution mandates that the state must respect, protect, and fulfill the human rights of all individuals, which includes ensuring access to basic services such as healthcare, education, social assistance and housing. This obligation is reflected in the fiscal framework through the allocation of public resources to these critical sectors, aiming to reduce inequality and promote social welfare. Additionally, the Constitution requires that public finances be managed responsibly, with principles of transparency, accountability, and the equitable distribution of resources. The budgetary process, therefore, becomes a tool not just for economic management but also for advancing constitutional values, ensuring that the fiscal framework supports the realization of socio-economic rights as enshrined in the Bill of Rights. In this way, the fiscal framework must align with and support the constitutional goal of building a fair and inclusive society for all South Africans.

The BJC has repeatedly raised concerns about the growth strategy pursued in the budget.

The fiscal strategy set out in the budget is part of the reason that the government is struggling to achieve growth. It is our position as the BJC that successive budget cuts since 2012 have contributed to the increase in debt-to-GDP and low growth. The Minister of Finance has finally admitted that the austerity path the government had undertaken was self-defeating, a position the BJC has taken since our inception. Despite this acknowledgement, there is still an active pursuit of a primary budget surplus. Prioritising a primary budget surplus – where revenue exceeds non-interest spending – limits the government’s ability to advance socio-economic rights and create conditions for job creation. Regrettably, this appears likely to be cemented through a fiscal anchor, representing an ongoing intention to limit de facto spending despite South Africa’s multiple challenges. We are concerned that a fiscal anchor might restrict parliament’s legislative decision-making power over spending and prevent the government from delivering on its constitutional obligations.

Economic growth

The government’s current efforts at accelerating economic growth are overwhelmingly focused on reducing supply-side constraints, as seen in recent state policies around freight, competition, business regulation, ports, and electricity (see Operation Vulindlela). On the other hand, not enough has been done to boost domestic consumer demand. South Africa maintains a high level of unemployment, high poverty rates, low median wages, and high income inequality. Collectively, this means a majority of the public simply does not have enough money to purchase. This is part of the reason the manufacturing industries have appallingly low capacity utilisation rates. Increasing domestic consumer demand will require a faster reduction of the unemployment rate, ensuring enforcement of minimum wages, complemented by higher increases to social grants. Importantly, it ensures that economic growth is inclusive and pro-poor.

“Investing in strategic infrastructure supporting job creation and maintaining a growth friendly fiscal policy will underpin government policy over the medium term”

Budget 2025 aims to lower the cost of government employment and shift the composition of purchases away from “consumption” towards “capital” spending. This choice has consequences for the composition of the government’s outputs because spending on government services such as education, healthcare, social development and criminal justice is inherently dominated by “consumption” spending because they are personnel-heavy. To address these changes, there should be an open and transparent discussion regarding the proposed accelerated early retirement and restructuring within the public service, including consultations specific to different departments. The National Treasury should explain how it plans to mitigate the potential loss of frontline services, experienced personnel, and management capabilities. 

A concern here is whether these workforce changes are intended as permanent reductions in headcounts or whether the National Treasury anticipates departments to substitute older employees with the recruitment of younger personnel.  Consequently, we raise a concern that the diversion of funds towards big infrastructure projects and the pursuit of a primary surplus might continue to reduce the quantity and quality of resources available for personnel-heavy departments such as healthcare, education, social development and criminal justice. 

Since 2017, social capital budgets have been cut back significantly. Conditional grants that finance provincial and local capital spending are also declining, and we are witnessing the adverse consequences of this underinvestment in the deteriorating state of the country’s education facilities, healthcare facilities, and community infrastructure. In contrast with the Treasury’s austere approach to on-budget social infrastructure, it has opened the window to joint investments with the private sector where feasible. Budget 2025 emphasises that infrastructure delivery will be done by mobilising private-sector financing involving pooling resources with the private sector in blended finances initiatives aimed at funding and implementing infrastructure projects more effectively. To this end, Budget 2025 proposes to exempt allocations to the “infrastructure fund” from the strictures of the main budget. This raises important questions about the allocative efficiency and equity in South Africa’s budget system. Decoupling operating spending from capital spending can result in inefficient outcomes and must be monitored closely. 

“Blended finance” mobilises private capital that must earn a financial return and often relies on user charges. This could result in projects being biased towards more affluent households. As a result, budget equity could be undermined because blended finance depends critically on fiscal subsidies out of general taxation to guarantee financial returns. Taken in combination, the government’s approach amounts to forcing down spending on social infrastructure (for services that are free at the point of delivery) while opening the door to unlimited funding for projects attractive to private capital, which tend to be projects that tend to benefit affluent citizens disproportionately.

The government’s efforts at accelerating economic growth beyond the low growth of the last decade will continue to be frustrated by inadequate allocations to economic development. Encouragingly, there is positive inflation-adjusted growth (6.2%) in spending on infrastructure over the medium term. In addition, expenditure on public employment appears to recover, although the money to be spent on the impactful Presidential Employment Stimulus is reduced from R12.6 billion in 2020/21 to R4.3 billion in 2025/26. ‘Industrialisation and exports’, as has been the tendency in previous years, see reduced allocations (in real terms). This is particularly disappointing as this item can make positive contributions to the two salient problems faced by the country, low economic growth and unemployment. Furthermore, despite the sluggish pace at which land redistribution has been carried out (to the detriment of the historically dispossessed), there is continued underfunding of ‘agriculture and rural development’, which over the medium term will be allocated amounts that are lower in real terms than in 2019/20.

Revenue 

Government has a constitutional responsibility to raise sufficient revenue to fund public services and realise its social and economic development goals. This includes ensuring the progressive realisation of rights such as education, healthcare, social protection, and basic services. The Budget Justice Coalition has consistently called for progressive revenue mobilisation strategies that prioritise equity and sustainability. This means placing a greater burden on those with the capacity to pay, rather than relying on regressive taxes that disproportionately impact poor and vulnerable households. In the current context of rising inequality, high unemployment, and growing poverty, it is more important than ever that revenue collection supports inclusive growth and social justice. We urge Parliament to scrutinise the revenue measures in this budget and ensure they align with these principles.

Tax proposals (2025/26)

The National Treasury has persisted with the controversial and ill-advised VAT increase, although at a lower level than initially proposed, and has now proposed two 0.5 percentage point increases per year over the next two fiscal years. When considered together with social grant allocations, it is unclear whether the 0.5 percentage point VAT increase is less harmful to poor households than the initially proposed 2 percentage point increase. This is because, while the VAT increase is lower, the allocation to social grants – which is the primary source of income for many poor households – over the medium term is also lower by R15 billion compared to the untabled budget. 

The proposed VAT increase will put further pressure on households already struggling to afford basic foods, transport and housing. While the expansion of zero rating may provide some temporary relief by reducing the price of the food basket, there has been limited analysis of how other goods and services will be impacted, and how these impacts will be distributed.

The VAT increase will also have an impact on government spending, as increased prices will reduce the buying power of goods and services, which comprise a significant share of total government expenditure, particularly in social sectors, like health and education If the 2018 VAT increase was anything to go by; coupled with weakened tax collection capacity; there does not appear to be strong evidence to suggest that the VAT increase will in fact result in the additional revenue (R28 billion in 2025/26) as estimated.

In addition, the lower increase in the VAT rate is partially compensated for by across-the-board freezes in personal income tax (PIT) brackets. While these PIT brackets have, in the past, been over-adjusted for inflation, the move to freeze all brackets is a very untargeted approach and means individuals in lower-income tax bands will also face higher taxation. This, together with the VAT increase, is regressive and unduly places the burden on poor and lower-income households. An equitable approach should freeze higher income brackets, ensuring that low-income households are protected from the high cost of living.  Potential sources of revenue, some of which can be implemented in the short term as an alternative to the VAT increases, include:

1. Restore the Corporate Income Tax (CIT) rate to 28%, as the reduction to 27% has not delivered increased investment. The CIT rate has steadily declined from nearly 50% in 1993 to its current level. 
2. Eliminate ineffective corporate tax incentives, such as the Employment Tax Incentive, which have failed to achieve intended employment outcomes. 
3. Improve the taxation of wealth and income from wealth through stronger inheritance taxes, financial transaction taxes, and steps toward implementing a net wealth tax. 
4. Draw on the Gold and Foreign Exchange Contingency Reserve Account (GFECRA), which holds over R300 billion in available resources. 
5. Strengthen SARS’s revenue collection capacity and tackle illicit financial flows. 
6. Temporarily pause contributions to the Government Employees Pension Fund to raise revenue without jeopardising pension security. 
7. Prioritise addressing fruitless and wasteful expenditure and strengthening anti-corruption measures across all levels of government. 

Despite claims of thorough examination of all alternatives, the  Budget Review fails to provide adequate insight into the National Treasury’s decision-making process, the rationale behind key choices and the projected impact of the choices on the public and the public service. The BJC and others provided detailed proposals of more palatable alternatives to regressive VAT increases.

If these alternatives are not better than increasing VAT amidst a cost of living crisis, where approximately 3.7 million households faced moderate to severe food insecurity and 1.5 million endured severe hunger, then the Treasury should provide detailed justifications.

We are calling for a deeper interrogation of the potential impacts of the proposed VAT increase, including impacts to government purchasing power before this proposal is accepted. 

VAT on the household food basket

In March 2025, 22 out of 44 foods in the total household food basket were subject to VAT. These VAT-applicable foods made up 47% of the total basket cost, with zero-rated items costing R2 849.18 and VAT-rated items costing R2 480.17, bringing the total household food basket to R5 329.36. VAT on the total basket amounted to R323.50, meaning that 6.1% of the household food basket was made up of VAT (see page 4 of the March 2025 Household Affordability Index).

The Rand-value of VAT on basic food items is high relative to what low-income families can afford to spend on food. This tax reduces money available for additional food, improved nutritional diversity, and better-quality items. The proposed increase in the VAT rate to 15.5% would have raised the VAT cost on this month’s food basket to R334.28, an additional R10.78.

The context of the VAT hike must be seen in the context of a food affordability crisis.  ata from the Pietermaritzburg Economic Justice and Dignity price index shows that:

• For a household of 7-members (The Household Food Basket), the total cost of the food basket is R5 329,36.  Divide this by 7-members, and we get a per person spend of R761,34.  This is below the Food Poverty Line of R796.  (See page 2 of March 2025 Household Affordability Index).
• For a worker’s family of 4-members, where one worker is employed and earns at the National Minimum Wage level, our data shows a 47,4% shortfall in nutritious food, with less than R490,85 per person available to spend on food.  This is below the Food Poverty Line of R796. (See page 8 of March 2025 Household Affordability Index).
• For families with children, and relying on the Child Support Grant of R530 per month, the average cost of feeding a child a nutritious diet in March is R951,00. The Child Support Grant is 33% below the Food Poverty Line of R796 and 44% below the average cost to secure basic nutrition for a child.  See page 6 of March 2025, Household Affordability Index). 

Hiking the VAT-rate in this context will only hurt families further, and have consequences for our social, health and economic outlook.  Hiking the VAT-rate was an idea, a proposal – it does not have to be implemented.  We do have other options to raise revenue that may be far less harmful to our people, businesses and economic growth.

South African Revenue Service (SARS)

The ability to generate revenue for its priorities depends on the capacity of SARS to design appropriate tax policies, identify impacts and collect revenue.

In the budget speech, the Minister states that SARS is allocated R3.5 billion in the current financial year and an additional R4 billion over the medium term. This is not reflected in the Budget Review or the National Treasury Vote of the ENE, which shows only R500 million in additional funding allocated to SARS (Machinery and equipment) and a 5% nominal increase to SARS (Operations).

The Budget Review includes the following explanation in response to the recommendations of the Finance Committees from the 2024 Budget and MTBPS;

The 2024 MTBPS allocated additional funding of R500 million in 2025/26, R1.5 billion in 2026/27 and R1.5 billion in 2027/28 to support capital projects and strengthen the revenue-raising capabilities of SARS. The National Treasury will continue to engage SARS on its budget requirements for its priority projects and make the necessary adjustments based on affordability and the capacity of SARS to fully roll out the implementation of projects.

The inconsistency here is not acceptable. We understand that perhaps the plan is to provide an in year adjustment to SARS, due to the fact that recruitment of specialists may take time, but this must be explained in the budget documents to avoid confusion and provide assurances that the funds have been earmarked for this specifically and SARS can make the necessary arrangements to improve capacity. Given the important role of SARS in boosting revenue, and the estimated R800 billion in uncollected taxes, we expect that National Treasury should be doing everything in its power to ensure that SARS is fully funded. The BJC is calling on National Treasury to provide a clear explanation of the discrepancy and inform the public on plans to capacitate SARS. We further ask that the National Treasury ensure that it explores all available options to ensure that the maximum resources are made available for this purpose.

We are calling on the Committee to oversee this process by engaging with National Treasury and SARS. The impact of additional funding and associated outcomes should be tracked by the relevant Committees and findings shared with the public in a meaningful and accessible format.

Spending framework

The 2025 Budget reflects a shift from aggressive spending cuts that have been enacted under the fiscal consolidation strategy of the National Treasury. This is a welcome development and a step in the right direction. However, the BJC raises concerns about the over-reliance in Budget 2025 on provisional allocations (R204.8 billion over the MTEF) “that will be made available to departments during 2025/26 and over the medium term once certain conditions are set”. 

According to the National Treasury, one of the conditions is that departments will receive their funds “once the extent of their participation in the early retirement programme is clarified”. Excluding such a large share of expenditure from the Appropriation Bill, the Division of Revenue Bill and the Estimates of National Expenditure are deeply concerning. It muddies the ability of Parliament to exercise its law-making abilities to convert the government’s agreement about its spending programme into credible estimates for the year ahead. Provisional allocations are now at the discretion of the Treasury, without public scrutiny, to disperse the funds, as opposed to an open and democratic parliamentary process. Lastly, it calls into question the credibility of this year’s annual spending envelope and the medium-term spending path.

Constitutional obligations and social investment

The government’s fiscal approach to social investment continues to be underpinned by two fallacious assumptions. Its first assumption is that social investment – particularly through healthcare, education, and social protection – should be characterised primarily as an expense, which must be balanced against the needs to consolidate debt and encourage growth. This position is both fiscally irresponsible and plainly untrue. Social expenditure is an investment in human capital, ensuring a sustained ability to produce knowledge, goods and services. Simply, economic growth requires an educated, healthy, safe, working population which is protected from re-entry into poverty. Social investment is also a crucial form of debt consolidation, as a failure to ensure sufficient social investment creates disproportionately high social spending requirements in the medium to long term. Having persistently failed to ensure sufficient social investment, our current levels of required expenditure are the consequence of decades of social debt accumulation, which will continue to incur interest as social deprivation worsens.

Government’s second assumption, closely linked to the first, is that social protection, particularly grants such as the Social Relief of Distress (SRD), Child Support, and others, is a temporary fiscal pressure that should be reduced as soon as possible. This is evident in the ongoing failure to commit to a permanent grant framework, with extensions made on a year-to-year basis, and in National Treasury’s clear intention to reduce both the number of beneficiaries and overall grant expenditure over the medium to long term. This approach not only disregards the Section 27(1)(c) constitutional right to social security and children’s Section 28(1)(c) right to basic nutrition, but also overlooks the economic reality that direct cash transfers remain one of the few effective tools for stimulating consumer demand, particularly in low-income communities where job creation has not materialised. Parliament must exercise strong oversight to ensure that this essential form of economic stimulus is not undermined in the name of fiscal consolidation.

We are calling for a budget that recognises social spending as an investment in the people of South Africa who wish to realise their potential and contribute towards inclusive growth and social wellbeing.

Debt

As noted by the National Treasury, South Africa’s debt levels, at 76.2% (estimated for 2025/26) of GDP, are in-line with other emerging market economies. In fact, National Treasury goes so far as to admit that the strategy of slowing spending growth to attain higher primary surpluses has failed, as debt continues to increase unabated. This is unsurprising as reducing growth in government spending in periods of low economic growth has globally been associated with worse growth outcomes, which further hikes the debt-to-GDP level. Rather, our government should prioritise measures that directly reduce the interest rate on government debt (cost of borrowing).

Tackling the high cost of South Africa’s debt is critical. The IEJ has presented a comprehensive policy toolkit that could be implemented over time to reduce debt service costs. These include the prudent use of capital management techniques such as capital controls to stabilise short-term, speculative capital flows and provide room to reduce interest rates; capital allocation tools such as regulated lending by banks to steer credit to productive sectors of the economy at affordable rates, including through Reserve Bank lending; central bank intervention in the primary market to purchase government bonds; and using prescribed assets to make large pools of capital available at affordable rates.

Given the gendered nature of poverty, inequality and unemployment, Parliament must ensure that debt management does not come at the expense of public services that women disproportionately rely on. This means enforcing transparency in loan agreements, scrutinising conditionalities that may trigger austerity, and safeguarding investments in the social wage, including healthcare, education, and employment initiatives. Debt sustainability must not be measured solely through fiscal metrics but also through its impact on socio-economic rights and gender equality.

We call on the National Treasury to explain measures taken to address debt service costs in response to the IEJ recommendations. What mitigating measures are put in place to ensure that poor and vulnerable families are not left to carry the burden of debt accumulation? Given the prominence of debt in the budget, there should be greater transparency and deeper participation.

Cross cutting issues

The fiscal framework must outline the principles and processes that ensure resources are allocated effectively to meet the country’s economic and social goals. Here we focus on two key cross cutting issues that should be addressed in the fiscal framework, gender responsive budgeting, and youth unemployment.

Gender Responsive Budgeting (GRB)

Gender-responsive budgeting (GRB) has the potential to be a transformative tool in tackling inequality in South Africa by ensuring that public resources are allocated in ways that actively reduce gender disparities and promote social and economic equity. 

We welcome the 2025 budget’s inclusion of a Gender Budget Statement that acknowledges the economic challenges faced by women and girls, however real progress requires more than recognition. We recommend that this be the first step in a move towards concrete, targeted investments in sectors that directly impact gender equity, particularly education, social development and health.

Moreover, the budget must address the disproportionate burden of unpaid care work, which overwhelmingly falls on women, whether in households, early childhood education, or healthcare. Without deliberate interventions, young women and girls who bear the brunt of poverty, unemployment, and school dropouts due to teenage pregnancy will remain systematically disadvantaged. To ensure meaningful impact, the pilot must be expanded to include the Departments of Basic Education, Health, Social Development, Home Affairs and Justice, integrating GRB into key policy areas that shape gender outcomes.

​In South Africa, poverty disproportionately affects women, especially those heading households. Approximately 71% of Black African women live below the poverty line, and female-headed households are among the poorest. Additionally, women are more likely to be employed in low-income jobs in the care economy, which offers few benefits, such as domestic work or part-time work and are disproportionately represented in unemployment statistics in the country. All of this, compounded by gender-based violence and high teenage pregnancy rates, highlights the urgent need for a budget that actively addresses poverty, inequality, and unemployment by recognising the lived experiences of women, who bear the brunt of these socio-economic challenges.

We briefly looked at departmental budgets in the ENE to determine whether there was any reporting on budgeting or managing performance related to gender, or more specifically, women. The table below provides a summary. 

Although not specifically identified in the budget as a gender responsive budgeting decision, the increase to the ECD budget represents a positive step in the right direction. The additional spending could impact women in the following ways:

• Increasing the number of children who can access safe and adequate ECD enables many thousands of women to seek work opportunities 
• The ECD sector employs predominantly women, so the increase will increase the number of work opportunities, and support increases in salaries towards decent work

We were also disappointed to see that the sections on the VAT proposal did not include any mention of the disproportionate impact on women.

Clearly much more needs to be done to improve the GRB framework, and adherence across departments to update their reporting. 

The BJC would like to ask the National Treasury to elaborate on plans in place to incorporate other departments, and to institutionalise GRB as a process in the budget, rather than simply an exercise of tagging expenditure, after key choices have already been made.

The BJC requests that this Committee consider our inputs and work together with the National Treasury and possibly with other committees that oversee the departments to fast track this process. We cannot leave this as an afterthought in the budget process. There should be timelines in place, and robust participation and engagement of the public.

Youth Unemployment

Young people remain the hardest hit by unemployment and poverty, with a staggering 45.6% unemployment rate among those aged 15 to 34 at the end of 2024. Joblessness is most severe among 15- to 24-year-olds, reaching 59.4%, while more than 10 million young people remain economically inactive, neither in employment, education, nor training. While unemployment is a complex issue, its nature is structural- current interventions have failed to address the drives of the crisis- this is cause of concern not only for the well-being of youth, but also the general economic growth in the country.

Working-age population by age group and sex, 2014 and 2024. Source, Stats SA, 2025.

Even though we have seen a decrease in youth population in working age, young people between the ages of 15-34 years old constitute 50% of the working age population in South Africa. 

The labour force participation rate is a measure of the proportion of a country’s working age population that engages actively in the labour market- this can be done by working or looking for work. While the labour force participation rates of both youth and adults fluctuated in the reported period, adults had higher absorption rates than youth in the 10 years. Statistics SA reported that ‘between 2017 and 2021, the youth absorption rate was on a downward trend. The absorption rate for adults fluctuated and a steady decline was noted from 2018 to 2021 then later increased from 52.3% in 2022 to 54.3% in 2024. Overall, the absorption rate for youth and adults in the past 10 years decreased by 2.8 percentage points (from 30.5% in 2014 to 27.7% in 2024) and 3.3 percentage points (from 57.6% in 2014 to 54.3% in 2024), respectively. Analysis shows that youth unemployment rates were higher than adults in the reported period, by almost 50% in 2024. The youth unemployment rate increased from 36.8% in 2014 to 45.5% in 2024 while the adult unemployment rate increased from 15.5% in 2014 to 22.2% in 2024.

Despite this deepening crisis, the budget fails to prioritise youth, lacking bold interventions for higher education funding, skills development, and public employment. Instead of expanding youth employment support, the Presidential Employment Stimulus (PES) faces a drastic R4.5 billion cut, threatening initiatives that have been a vital lifeline for young job seekers. Compounding this, delays in UIF funding last year resulted in the loss of over 200,000 much-needed job opportunities for young people across the country. While the Minister announced an ongoing review of the public employment framework, there is no clarity on timelines or concrete plans for expanding job creation efforts.

A major concern is the absence of medium-term funding commitments for PES, which plays a critical role in supporting local economies, providing young people with much-needed work experience, and strengthening service delivery in under-resourced areas. Without sustained investment, these initiatives become mere stopgap measures, failing to create long-term employment pathways for young people. The lack of foresight in ensuring stable funding risks further entrenching generational unemployment, leaving millions of young people trapped in poverty. 

The Budget Justice Coalition awaits further analysis on the impact of the lower-than-expected VAT increase and reduced social protection funding. However, it is clear that a meaningful response to youth unemployment requires more than temporary relief measures. The budget must ensure adequate social protection remains in place while proposed reforms take shape, and government must prioritise long-term employment strategies that equip young people with skills, secure sustainable work opportunities, and break the cycle of poverty and joblessness. 

Key Social Expenditure Trends

Basic Education

The 2025 budget marks a significant shift, with the largest increase in basic education in the past decade, representing an important step towards rebuilding essential public services. The education budget has grown by 7.6% in nominal terms to R349.5 billion, translating to a 2.8% real increase after years of underfunding. Over the medium term, education spending is projected to grow by 1.3% in real terms, signalling a move away from the austerity-driven expenditure cuts of the past decade. Notably, infrastructure grants have increased by 4% in real terms, supporting much-needed school improvements. If effectively allocated, these increases have the potential to equip provinces better to tackle persistent challenges such as overcrowded classrooms, school infrastructure backlogs, and chronic teacher shortages. However, significant gaps remain, underscoring the need for a sustained and equitable investment strategy.

Despite these welcome increases, the budget falls short of addressing the full extent of the crisis in the basic education sector. Over a decade of austerity has placed immense strain on public schooling, with the Department of Basic Education (DBE) itself estimating budgetary pressures of up to R140 billion over the next three years. One of the most glaring funding gaps is in the implementation of the BELA Act, which has made Grade R compulsory. Currently, Grade R is funded at only 70% of its requirement, and provinces have indicated they will need an additional R45 billion over the next three years to implement this policy fully. Ensuring universal access to Grade R is not optional but a constitutional obligation. Treasury’s failure to allocate sufficient funds deprives the public education system of the teachers and infrastructure it needs, compromising the foundation phase and setting children up for continued disadvantages throughout their schooling years.

A second major concern is the continued underfunding of school infrastructure. While nominal increases in infrastructure spending are largely driven by allocations to the Western Cape and Gauteng through the Budget Facility for Infrastructure (BFI) blended finance mechanism, schools in rural provinces remain severely underfunded, facing critical backlogs that leave children without safe and dignified water and sanitation.

Additionally, the budget’s modest R69 million increase (1.9%) for workbooks and learning materials translates to a real decline of 3.5% when adjusted for inflation. Worse, the VAT increase may constrain provincial departments of basic education and schools purchasing power. All this shortfall risks undermining efforts to improve education quality and may force provinces to divert funds from other critical areas to cover the gap in learning support materials.

To effectively break the cycles of poverty and inequality and foster an inclusive and prosperous economy, South Africa must ensure that every child has access to well-resourced schools. This includes providing trained teachers, safe infrastructure, and sufficient learning materials. The success of the budget will depend on transparent spending that directly benefits learners and addresses the long-standing challenges in the education sector. However, it is concerning that the increase in education funding is being financed through a regressive VAT hike, which disproportionately impacts low-income families. This approach contrasts with the potential for progressive taxation measures that could more equitably share the financial burden. While this budget represents a crucial advancement, much more is required to ensure that basic education receives adequate funding to fulfill its constitutional mandate and offer every child the quality education they deserve.

Early Childhood Development (ECD)

A major highlight of the 2025 Budget is the additional R10-billion allocated over three years to expand Early Childhood Development, increasing the per-child subsidy (from R17 to R24/child/day) and access for an additional 700,000 children. This represents South Africa’s largest ever fiscal investment in early childhood development (ECD). We welcome this move considering the significant challenges to ECD access in the country, including inadequate infrastructure, insufficient funding for workforce development, and limited access for the most vulnerable children. 

At this rate, by 2027/28, the number of subsidised children will rise from 800,000 to 1.5 million, advancing the DBE’s goal of universal ECD access by 2030. However, significant gaps remain. The R210 million added to the ECD infrastructure grant for 2026/27 and 2027/28 falls short of what is needed to help over 19,000 unregistered ECD centres meet legal requirements and access subsidies. The early nutrition pilot sees a 70% funding increase to R336 million, a necessary step in tackling child malnutrition, which affects one in four children and limits their long-term development. Yet, the Child Support Grant increase of just 5.7% (R30) to R560 per month remains inadequate, failing to close the gap between household needs and the food poverty line of R796 per month. While these budget allocations mark progress, further investment is essential to secure quality early learning, nutrition, and support for vulnerable children, ensuring a more just and equitable future.

Health Care Spending

The 2025 budget allocates R298.9 billion to health, the highest investment since the COVID-19 pandemic and a 7.8% increase from last year’s R277.2 billion. This includes a R28 billion health bailout aimed at addressing provincial debt and sustaining health service delivery over the next year. While this is a significant intervention, it falls short of the R33 billion bailout that had been called for to fully alleviate pressure on the health system. The bailout seeks to cover funding gaps created by the withdrawal of US funding, the rising public sector wage bill, and years of accumulated budget shortfalls.

Health spending is set to grow from R277 billion in 2024/25 to R329 billion in 2027/28 to support the equitable provision of public health services, including free primary healthcare. However, a large portion of the bailout will go towards servicing existing debt, with sector accruals reaching nearly R22 billion. This reflects a broader structural issue, where allocated funds are spent on settling past obligations rather than meeting current healthcare needs, perpetuating a cycle of budget shortfalls, unpaid invoices, and cash flow crisis. Despite this, the budget includes critical allocations such as R28.9 billion to retain 9,300 healthcare workers, employ 800 post-community service doctors, and secure pharmacy medical supplies.

A key development is the first nominal increase of 1.2% to the Health Facility Revitalisation Grant since cost containment measures cut its budget in previous years. While still a real decrease, it signals a shift from previous funding patterns and could help provinces begin addressing backlogs in maintaining and repairing health infrastructure. This is particularly urgent given the increasing frequency of extreme weather events damaging clinics and hospitals, underscoring the need for climate-resilient healthcare infrastructure.

Compensation for healthcare workers rises to R194 billion, up from R179 billion, an 8.2% increase that could help address staff shortages. However, uncertainty remains over whether all unplaced medical graduates will be absorbed into the system. While this budget represents a step forward in stabilising public healthcare, concerns remain over governance and oversight to ensure these allocations reach those most in need. Additionally, the reliance on a VAT increase to fund these measures disproportionately burdens lower-income households, making access to universal healthcare more costly for those who can least afford it. To build on these gains, sustained investment and structural reforms will be necessary to prevent recurring financial crises in the sector and ensure that the right to quality healthcare is meaningfully upheld.

Social Protection

Social grants – one of the few support mechanisms available to struggling households – will receive R15 billion less than initially proposed in the February 19 Budget over the next three years, reducing the safety net for the most vulnerable. 

There are 18,3 million adults who live below the Food Poverty Line, yet only half receive the Social Relief of Distress (SRD) grant. The value of the SRD grant is eroded by inflation again this year, meaning that the initial poverty-reducing impact of this grant has shrunk over time. When questioned in the Finance Committee last week as to whether social grants are growing with inflation, Mr Edgar Sishi, DDG Budget Office, National Treasury replied that they are ‘all growing by inflation’. However this reply is not true in relation to the SRD grant, the lowest of all the social grants.  

The Child Support Grant and the SRD remain below the Food Poverty Line. The VAT increase, high rates of false exclusions, and small grant amounts all contribute to the rise in household hunger. These two grants have the lowest qualifying income thresholds of all the grants because they are targeted for the poorest – unemployed and precariously employed. Increasing these grants to the food poverty line would reach the poorest households in SA and reduce food insecurity.  Both grants should be increased at least to the food poverty line.

Summary

In summary, this submission highlights the urgent need to rethink South Africa’s economic and fiscal policy in the context of stagnant growth, rising poverty, deepening unemployment and inequality, and an increasingly uncertain economic outlook.

We call for a robust and participatory process to review the current fiscal framework and explore viable alternatives. This process should begin without delay and result in concrete changes reflected in the 2025 Medium Term Budget Policy Statement and the 2026 Budget. These changes must demonstrate a genuine commitment to a People’s Budget that prioritises socio-economic rights and inclusive growth.

The postponement of the budget and the widespread response it triggered across society underscore that this conversation is long overdue. It also presents Parliament with a rare opportunity to critically assess the budget proposals, amend regressive measures such as the VAT increase, and protect and build on allocations to social spending.

These Committees have the power and responsibility to ensure the budget responds to the needs of the most vulnerable and lays the foundation for a more just and inclusive future.