Negotiations surrounding South Africa’s 2025/26 budget remain tense, with the Treasury moderating its proposed VAT increase to 0.75 percentage points. However, the DA remains steadfast in its opposition to any VAT hike. Discussions also involve potential adjustments to the fuel levy and tax band compensations.
A key point of contention is a DA proposal for a Government Employees Pension Fund (GEPF) payment holiday, which could provide over R60 billion in one-time relief. While this addresses the 2025/26 funding gap, it doesn’t offer a permanent funding solution. The Treasury, seeking to fund recurring expenditures like public servant salaries and social grants, faces the challenge of finding long term solutions.
The DA is pushing for a comprehensive spending review, aiming to force the ANC to commit to fiscal discipline. Finance Minister Enoch Godongwana has acknowledged that a spending review is necessary, but that it will happen after the postponed budget is tabled. The Treasury had expressed initial opposition to the GEPF holiday, but is now examining its feasibility.
Public sector unions have voiced strong opposition to any changes to the GEPF, citing a lack of trust in the government. Recent developments, such as the US’s withdrawal of PEPFAR funding, have added further pressure to the budget discussions, creating a significant hole in the health budget.