South Africa’s 2025 budget brings VAT increases and new business opportunities. Learn what it means for you with five steps to protect and grow your profits.
Finance Minister Enoch Godongwana’s 2025 Budget Speech, delivered on 12 March 2025, introduced major shifts that will directly impact your bottom line and create new opportunities—if you know where to look.
Indeed, your business’ survival and growth in 2025 could hinge on how well you navigate the changes in this year’s budget speech.
The postponement of the Budget tabling by 3 weeks—described by the Minister as “a regrettable, but perhaps an understandable feature of multiparty governance” and “a sign of a maturing and resilient democracy”—sparked unprecedented public debate about policy trade-offs.
This delay, particularly discussions around the proposed VAT increase, highlighted the difficult choices facing the government in this pivotal year.
With economic growth at just 0.6% in 2024 and medium-term projections of 1.8%, this Budget aims to balance fiscal stability with stimulating growth.
But what does this mean for your business specifically?
Let’s cut through the complexity to reveal the practical implications and opportunities you need to prepare for now.
Here’s what we’ll cover
- Your 2025 tax outlook: The VAT increase and what it means for your cash flow
- Investments fuelling business growth: R1 trillion infrastructure spending opportunity
- Public-private partnerships: Simplified rules create new market access
- Economic outlook: Energy sector transformation and growth projections
- Tax administration and compliance: New SARS funding signals increased enforcement
- Support measures for your workforce: Budget implications for employment
- An action plan: five steps to budget-proof your business in 2025
Your 2025 tax outlook: The VAT increase and what it means for your cash flow
The most immediate impact on your business comes from the VAT increase—rising by 0.5 percentage points this year (2025/26) and another 0.5 percentage points next year, bringing the rate to 16% by 2026/27.
This change will raise R28 billion in additional revenue in 2025/26 and R14.5 billion in 2026/27.
What this means for your bottom line
- You’ll need to update your accounting systems and pricing strategies
- Customer purchasing power may be affected, potentially impacting sales volumes
- Cash flow planning should account for the increased VAT payments
- Your VAT returns will require careful attention during the transition periods
Actions to take now
- If you’re a small business owner, schedule a meeting with your accountant to discuss implementation timelines.
- Review your pricing strategy—will you absorb some costs or pass them all to customers?
- Update your financial forecasts to reflect the VAT changes.
- Communicate transparently with customers about any price adjustments.
- Consider the timing of large purchases or investments to optimise VAT implications.
The Minister explained that VAT was chosen over corporate or personal income tax increases because it would generate more revenue while causing less harm to investment and job creation.
While this may be true at a macro level, you’ll still need to navigate the immediate effects on your day-to-day operations.
There’s also good news for businesses concerned about employee spending power: the expanded basket of VAT zero-rated food items will now include canned vegetables, dairy liquid blends, and organ meats.
Additionally, there’s no increase to the fuel levy for another year, saving consumers around R4 billion—which could help offset some of the spending constraints your customers might face.
Investments fuelling business growth: R1 trillion infrastructure spending opportunity
The government is investing over R1 trillion in infrastructure over the next 3 years, creating significant opportunities for businesses across multiple sectors:
- R402 billion for transport and logistics
- R219.2 billion for energy infrastructure
- R156.3 billion for water and sanitation
This level of spending represents one of the largest business opportunities in the current economic climate.
Even if infrastructure isn’t your core business, these investments will create ripple effects throughout the economy.
Direct opportunities for your business
If you work in construction, engineering, materials supply, logistics, or professional services, there are substantial contract opportunities on the horizon.
But even if you’re not directly in these sectors, improved infrastructure can reduce your operating costs and open new markets.
Some specific projects to monitor include:
- SANRAL spending R100 billion on road infrastructure over the medium term.
- Provincial roads departments resealing over 16,000 lane-kilometres.
- PRASA receiving R19.2 billion for critical signalling upgrades.
- The Mkhomazi Water Project (starting November 2027) that will increase capacity to 5 million households.
- The Berg River-Voëlvlei Augmentation Scheme (starting July 2026) improving Western Cape water security.
How to position your business to benefit
- Research specific projects relevant to your industry and region.
- Consider forming strategic partnerships to bid on larger contracts.
- Ensure your business meets compliance requirements for government tenders.
- Attend industry briefings and networking events focused on infrastructure development.
- Look for supply chain opportunities feeding into major projects.
Public-private partnerships: Simplified rules create new market access
If you’ve considered working with government but found the process daunting, there’s good news coming on 1 June 2025.
New regulations for public-private partnerships (PPPs) will take effect, designed to reduce complexity and create clearer rules for engagement.
These new regulations represent a significant shift in how businesses can collaborate with government entities.
They will:
- Reduce the procedural complexity of undertaking PPPs,
- Create capacity to support and manage PPPs,
- Establish clear rules for managing unsolicited bids, and
- Strengthen fiscal risk governance.
The Department of Transport and Transnet have already announced plans to engage the market on private sector participation in several high-value areas:
- Rail freight lines (ore, chrome, coal, and manganese),
- Port terminal expansion at Richards Bay,
- Container and automotive sectors, and
- Independent rolling stock leasing.
In the energy sector, similar opportunities are emerging with the Independent Transmission Programme launching later this year.
A request for information for a multi-line transmission package will be issued by July, followed by a request for proposals in November.
How to prepare your business
- Mark 1 June 2025 on your calendar to review the new PPP regulations,
- Identify which government departments or state-owned enterprises align with your offerings,
- Consider how your business could contribute to solving infrastructure challenges,
- Develop capabilities or partnerships that would strengthen your PPP proposal, and
- For smaller businesses, identify opportunities to join supply chains servicing larger projects.
The Budget Facility for Infrastructure (BFI) has been reconfigured to run multiple bid windows instead of just one annual window.
The first window is already open and will close mid-April, with the next window opening soon after.
This provides more frequent opportunities to propose and secure project funding.
Economic outlook: Energy sector transformation and growth projections
The 2025 Budget Speech painted a sobering picture of South Africa’s economic performance, with growth at just 0.6% in 2024 and medium-term projections averaging 1.8%—far below what’s needed to meet the country’s expanding developmental goals.
Despite these challenges, the energy sector is showing promising signs of transformation that could help unlock economic growth.
The progress made through Operation Vulindlela—the joint initiative between Treasury and the Presidency to fast-track structural reforms—has already created a 22,500-megawatt pipeline of energy projects, with more than 10,000 megawatts formally registered with NERSA
What the energy reforms mean for your business
- If you’re energy-intensive, more reliable power supply is on the horizon,
- Opportunities exist for businesses in the renewable energy, engineering, and transmission sectors,
- Energy costs may stabilise as more independent power comes online, and
- Reduced power cuts could improve your productivity and reduce costs associated with backup power.
The Eskom debt relief arrangements have been simplified, with the final phase of the debt relief package adjusted.
The last R70 billion debt takeover will now be replaced with R40 billion in 2025/26 and R10 billion in 2028/29, resulting in a saving of about R20 billion.
This indicates that Eskom is now in a better financial position than in 2023 when the debt relief was originally announced—a positive sign for future energy stability.
For businesses planning long-term investments, it’s worth noting that the government’s strategy to achieve faster growth remains anchored on four pillars:
- Maintaining macroeconomic stability,
- Implementing structural reforms,
- Improving state capability, and
- Accelerating infrastructure investment.
These priorities suggest that while growth remains sluggish in the short term, the foundation is being laid for more sustained economic expansion in the future.
Tax administration and compliance: New SARS funding signals increased enforcement
SARS is receiving significant additional funding—R3.5 billion in the current financial year and an additional R4 billion over the medium term to improve administrative efficiency and broaden the tax base.
This investment in the revenue collector’s capabilities is a clear signal of heightened enforcement coming your way.
SARS has already detected 156,000 taxpayers who are not registered or have not filed despite substantial economic activity and reported a significant increase in undisputed debt.
Minister Godongwana made a direct call to all South Africans to comply with tax laws and support SARS in its revenue collection efforts, emphasising that these revenues enable the government to fund critical services.
Practical implications for your business
- Expect more rigorous tax enforcement and compliance checks,
- Prepare for increased scrutiny of business operations and tax filings,
- Ensure your business tax affairs are in order, with all registrations current,
- Consider a voluntary disclosure if there are historical compliance issues,
- Budget for potentially faster resolution of tax disputes as SARS capacity improves, and
- Update your record-keeping systems to ensure all tax documentation is readily available.
While increased SARS efficiency might seem concerning if you’ve been less than meticulous with compliance, it should ultimately benefit compliant businesses by creating a more level playing field.
Companies that have been diligently fulfilling their tax obligations will face less competition from those operating outside the system.
The Minister specifically thanked compliant taxpayers who pay their fair share, while encouraging those who aren’t compliant to “do the right thing.”
This emphasis on compliance, coupled with significant investment in SARS capabilities, makes tax governance a business priority for 2025.
Support measures for your workforce: Budget implications for employment
Several budget allocations will affect how you manage your workforce and the broader labour market your business operates in:
Wage expectations
A three-year public-sector wage agreement will likely influence private-sector wage expectations.
This agreement will cost an additional R7.3 billion in 2025/26, R7.8 billion in 2026/27, and R8.2 billion in 2027/28.
Education and skills development
Additional funding for education (R19.1 billion to keep 11,000 teachers) and early childhood development (R10 billion to increase the subsidy from R17 to R24 per day per child) will affect future workforce capabilities.
Social support
Increases in social grants (old age and disability grants up by R130 to R2,315; Child Support Grant up by R30 to R560 per month) may reduce financial pressure on some of your employees.
COVID-19 Social Relief of Distress (SRD) grant:
This will be extended by a year to end-March 2026, with R35.2 billion allocated.
More importantly, the President announced in his State of the Nation Address that the SRD will be used as a basis for introducing sustainable income support for unemployed people.
The last point is particularly significant for businesses.
The future form of unemployment support will be informed by a review of active labour market programs, expected to be completed by September 2025.
This could have far-reaching implications for labour markets and workforce planning.
How your business should respond
- Review your compensation strategy in light of public sector wage trends,
- Consider partnerships with educational institutions to develop talent pipelines,
- Assess how social grant increases might affect wage negotiations or financial wellness programs for employees,
- Monitor developments in the labour market program review to anticipate changes to unemployment support, and
- Consider participating in skills development initiatives that might receive government support as part of active labour market programs.
An action plan: five steps to budget-proof your business in 2025
Based on Minister Godongwana’s Budget Speech, here are five key actions to position your business for success in the coming year:
1. Update your financial strategy for the VAT increase
- Incorporate the 0.5 percentage point VAT increases (this year and next) into your pricing and cash flow forecasts.
- Assess the impact of no inflation adjustments to personal income tax brackets on your employees’ take-home pay.
- Review contracts with suppliers and customers to determine how VAT changes will be handled.
- Prepare your accounting systems for the transition to the new VAT rate.
2. Identify infrastructure and PPP opportunities aligned with your business
- Map your products or services against the R1 trillion infrastructure spending plan.
- Research specific requirements for government tenders and the new PPP regulations.
- Consider forming consortiums with complementary businesses to strengthen bids.
- Allocate resources to monitor the multiple bid windows of the Budget Facility for Infrastructure.
3. Strengthen your tax governance framework
- Schedule a comprehensive tax health check with your accountant in light of increased SARS funding.
- Ensure all tax registrations and filings are current and accurate.
- Review transfer pricing and other tax planning mechanisms for compliance.
- Implement robust systems to capture and document all tax-relevant business activities.
4. Develop contingency plans for continued economic challenges
- Build scenarios based on the projected 1.8% medium-term economic growth.
- Identify cost-saving measures that won’t compromise your competitive position.
- Assess your business’ vulnerability to persistent electricity, logistics, and water constraints.
- Create early warning systems to detect changes in customer behaviour due to economic pressures.
5. Leverage government initiatives and structural reforms
- Research how Operation Vulindlela’s Phase 2 reforms might create opportunities for your business.
- Consider how your business can benefit from developments in digital public infrastructure.
- Monitor conditional grant programs that might benefit your sector or region.
- Align your business development strategy with the government’s focus areas (energy, water, logistics).
Final thoughts
Ultimately, the 2025 Budget Speech represents both challenges and opportunities.
By staying informed, proactive, and strategic, you can turn fiscal constraints into competitive advantages and position your business to thrive, even in a challenging economic landscape.
The businesses that adapt fastest to these new realities will be the ones that lead South Africa’s economic recovery.