South Africans were eagerly awaiting Finance Minister Enoch Godongwana’s 2025 Budget Speech, hoping for measures to ease financial pressure. However, the budget presents a mixed bag—while it seeks to stabilise government finances, the cost of living is set to rise due to tax changes. The question is: how will this affect the average South African?

Let’s unpack the key changes and what they mean for consumers:

VAT Increase – Higher Prices for Everyday Goods

One of the most notable changes is the increase in Value-Added Tax (VAT), which will rise from 15% to 15.5% on May 1, 2025, with another 0.5% increase coming in 2026.

For consumers, this means everyday goods and services will become more expensive—from electricity and clothing to transport and personal care products. While basic food items remain VAT-exempt and more items were added to VAT- exempt, the reality is that many essentials will see price hikes, adding further strain to household budgets.

This increase will hit low- and middle-income earners the hardest, as VAT is a regressive tax—meaning it takes a bigger proportion of income from the poor than from the wealthy.

Income Tax Bracket Freeze – More Tax Without a Tax Hike

While there is no direct increase in personal income tax rates, the government has not adjusted tax brackets for inflation. This means that as salaries rise due to inflation, many South Africans will be pushed into higher tax brackets, effectively paying more tax without actually earning more in real terms.

Middle-class and working professionals will feel the impact the most, as their take-home pay shrinks despite salary increases.

Fuel Levies – A Small Relief

In a small win for motorists, the general fuel levy and the Road Accident Fund (RAF) levy will remain unchanged for another year, continuing the freeze introduced in 2022. This move provides around R4 billion in tax relief, preventing an even bigger fuel price hike.

Sin Taxes – Alcohol and Cigarettes Just Got Pricier

For those who drink or smoke, the budget brings another annual increase in excise duties:

            •           Alcohol duties up by 6.75%:

            •           A 340ml beer will cost about 15 cents more.

            •           A bottle of wine will increase by 38 cents.

            •           A 750ml bottle of spirits (whisky, brandy, vodka) will go up by R5.97.

            •           Tobacco duties up by 4.75% (6.75% for cigars and pipe tobacco):

            •           A pack of cigarettes will cost more.

            •           Vapes and e-cigarettes are also taxed higher.

The government justifies these increases as a public health measure while raising revenue. However, for consumers, this means that drinking and smoking will take an even bigger chunk of their budgets.

Social Grants – Modest Increases Amid Rising Costs

Millions of South Africans depend on social grants.  While grant payments will increase slightly, they may not keep up with food inflation, meaning beneficiaries will still struggle to afford essentials as prices continue to rise.

Public Transport & Infrastructure – Will It Deliver?

The government is allocating R19.2 billion to the Passenger Rail Agency of South Africa (PRASA) to improve train services, alongside an additional R11.8 billion for infrastructure projects.

If these funds are managed efficiently, commuters could benefit from better, cheaper transport options. However, given past mismanagement of infrastructure budgets, accountability will be key to ensuring that South Africans see improvements.

What Should Consumers Do?

Given these changes, South Africans must adapt their financial strategies. Here’s what consumers can do:

1. Adjust household budgets – Anticipate higher prices for essentials and non-essentials alike.
2. Maximize tax savings – Take advantage of tax-free savings accounts, medical aid deductions, and retirement contributions to reduce taxable income.
3. Monitor fuel and transport costs – If PRASA upgrades succeed, rail transport could be a cheaper alternative to private vehicles.
4. Consider lifestyle changes – With sin taxes rising, cutting back on alcohol and smoking could save significant money.

Final Thoughts: A Tough Year for Consumers

While the government has made some strategic investments, this budget largely increases the financial burden on South Africans through higher VAT, unchanged tax brackets, and rising sin taxes.

For the economy to grow sustainably, South Africa must prioritize job creation, economic growth, and efficient public spending—or risk placing even greater strain on consumers in the years ahead.