12 March 2025
The Federation of Unions of South Africa (FEDUSA) acknowledges the 2025 Budget Speech delivered by Finance Minister Enoch Godongwana earlier today, Wednesday, 12 March 2025. As a federation representing workers across multiple sectors and an advocate for the poor, we assess the budget based on its impact on employment, economic growth, social protection, and service delivery. While we welcome certain allocations, we raise concerns about several key areas that will profoundly affect workers and the broader economy.
VAT Increase
The proposed staggered 1% VAT increase over two years to 16% disproportionately affects low-income workers and vulnerable households. FEDUSA urges the government to explore alternative tax measures, such as a wealth tax and stronger enforcement against illicit financial flows, rather than burdening consumers. The decision not to raise corporate taxes shifts the tax responsibility onto workers and consumers while failing to ensure that large businesses contribute fairly. Additionally, the economic shocks of this VAT hike will exacerbate the cost-of-living crisis, as consumers will bear the brunt of price adjustments and inflationary pressures.
Expansion of VAT Zero-Rated Items
FEDUSA welcomes the inclusion of tinned vegetables and dairy liquid blends and other items in the expanded list of VAT zero-rated items. However, we call for a broader review to include more staple foods that specifically promote healthy living. This is crucial in combating the rise of communicable diseases such as diabetes and hypertension. While we acknowledge the effort to cushion the poor, we urge the government to prioritise both nutritional benefits and affordability.
Public Sector Wages
The recently concluded three-year wage agreement provides stability and demonstrates organised labour’s commitment to public service sustainability. However, FEDUSA demands assurances that job security and fair compensation will be maintained in the long term. The government’s strategy of leveraging departmental budgets to address compensation shortfalls through early retirement schemes is concerning, especially given past worker rejections of similar initiatives.
Should workers not take up early retirement offers in large numbers, the public sector may face further staffing shortages, particularly in critical posts. With the public service already strained due to unfilled vacancies, FEDUSA questions the government’s contingency plan should the anticipated savings from early retirements not materialise.
FEDUSA also notes the decision to undertake an audit of ghost workers, starting with national and provincial departments. We are however appalled that it has taken the government such a long time to implement this measure, provided the vast amount of evidence supporting the existence of this challenge in the public service.
Social Protection Measures
FEDUSA welcomes the above-inflation increase in social grants and the extension of the COVID-19 Social Relief of Distress (SRD) Grant until March 2026. We call on the government to ensure a smooth transition towards the implementation of a Basic Income Grant, which would provide long-term support for unemployed South Africans. Additionally, we commend Treasury’s commitment to reviewing the SRD database to root out fraud, as highlighted in recent research by Stellenbosch University.
Social Spending
FEDUSA recognises the additional allocations to critical sectors such as health and education. The R28.9 billion increase in health spending to retain 9,300 healthcare workers, employ 800 post-community service doctors, and ensure medicine availability is commendable. In education, the R19.1 billion allocated to retaining 11,000 teachers will help stabilise the system. However, we stress that sustained investment in frontline services remains crucial for long-term workforce retention and improved service delivery.
Municipal Debt and Service Delivery
FEDUSA commends the government’s debt relief measures for municipalities but stresses the urgent need for stronger financial accountability at the local level. Without significant improvements in municipal governance, debt relief alone will not resolve systemic inefficiencies that undermine service delivery.
Disaster Risk Financing
The R1.7 billion allocation for disaster response is necessary, but we urge the government to enhance disaster preparedness instead of focusing solely on post-crisis interventions. Strengthening municipal infrastructure and governance will be key to mitigating risks before disasters occur.
Fuel Levy
FEDUSA welcomes the decision not to increase the fuel levy, saving consumers an estimated R4 billion.
However, we reiterate our call for a reduction in the levy to provide meaningful relief to workers who spend a disproportionate share of their wages on transportation costs.
Infrastructure Investment and Public-Private Partnerships (PPPs)
While we acknowledge the R1 trillion infrastructure investment plan, FEDUSA remains concerned about execution. The R402 billion allocation for transport must prioritise affordable commuter rail services, while the R219.2 billion for energy must focus on stabilising Eskom and integrating renewable energy solutions.
The R156.3 billion for water infrastructure should urgently address municipal inefficiencies to prevent service delivery failures.
Regarding PPPs, FEDUSA remains cautious about increased private sector involvement in state assets.
Past experiences have led to job losses and a departure from public interest priorities in favour of shareholder returns. The government must ensure that PPP regulations prioritise job retention and service quality over commercial interests.
Fiscal Strategy and Debt Stabilisation
FEDUSA acknowledges efforts to stabilise public debt at 76.2% of GDP by 2025/26 and narrow the budget deficit to 3.5% by 2027/28. However, fiscal consolidation must not come at the expense of essential public services. While some spending has increased, previous austerity measures have not been meaningfully reversed, leaving critical sectors constrained.
Economic Outlook and Structural Reforms
FEDUSA acknowledges the IMF’s 3.3% global growth projection and South Africa’s domestic GDP forecast of 1.8% over the medium term. However, slow economic recovery necessitates bolder interventions in industrialisation, job creation, and labour market reforms. While Operation Vulindlela’s achievements in energy and water licensing are commendable, broader structural reforms are required to ensure economic resilience and job security.
SARS Capacity Enhancement
FEDUSA welcomes the allocation of R3.5 billion for SARS this financial year, with an additional R4 billion over the medium term. Strengthening SARS’ capacity is critical to improving tax collection and reducing reliance on regressive tax measures like VAT increases. We urge the government to prioritise enforcement against tax evasion and illicit financial flows.
Conclusion
FEDUSA supports certain elements of the 2025 Budget but raises serious concerns about the VAT increase, adequacy of social spending, and infrastructure execution risks. We call for an inclusive economic approach that prioritises worker protections, decent wages, and a more capacitated public service.
The projected 1.8% GDP growth over the medium term is too low to reduce unemployment and improve workers’ economic prospects significantly. While infrastructure investment is highlighted, direct financial relief and support for small and medium-sized enterprises remain inadequate, undermining job creation efforts.
FEDUSA remains committed to engaging with the government to ensure these concerns are addressed and that the budget serves the interests of all workers and South Africans at large.
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