No VAT increase – But are you still paying more?

After two failed attempts and weeks of political wrangling, Finance Minister Enoch Godongwana finally delivered the third iteration of the 2025 National Budget Speech on Wednesday, 21 May. While many South Africans breathed a sigh of relief at the announcement that the proposed VAT increase had officially been scrapped, the true cost of this budget might not be as comforting as it seems.

Consumers should look beyond the headlines. No VAT increase sounds like a win, but when you dig deeper into the numbers, the financial strain on households is still very real.

Hidden Costs Behind the Relief

Although VAT will remain at 15%—a move that Minister Godongwana says reflects the government’s commitment to listening to the public—the budget makes up for lost revenue in less obvious ways. These include:

• Fuel Levy Hike: Starting June 4, 2025, fuel levies will increase by 16 cents per litre for petrol and 15 cents for diesel, ending a three-year freeze. With total fuel taxes now accounting for 30–33% of the pump price, this is a direct hit on transport costs, which in turn affects the price of food and goods.
• Bracket Creep: Personal income tax brackets have been left unadjusted for inflation, which means that even if you didn’t get a raise, you could be taxed more. Known as “bracket creep,” this silent tax increase reduces your real income without changing the tax rate.

People might not feel it immediately, but over the next few months, the rise in fuel costs and the bracket creep will slowly erode their purchasing power. It’s a hidden burden, especially on the working class who are already walking a financial tightrope.

Pressure on Households

The government expects to raise R18 billion this year from these indirect tax measures. Yet, South African consumers—already stretched by high interest rates and sluggish economic growth—will bear the brunt. It’s not just about what you pay at the till. It’s about your rent, your transport, your grocery bill—all creeping up while your salary stays the same.

This is particularly concerning given that South Africa’s economy is projected to grow by just 1.4% in 2025, down from the 1.8% forecast in March. At the same time, debt servicing costs are ballooning, and the national debt-to-GDP ratio is expected to peak at 77.4%—a warning sign that the room for economic manoeuvring is shrinking.

Tips for consumers after the budget speech:

• Budget for Rising Transport and Food Costs
• With the fuel levy increase taking effect in June, transport and delivery costs will rise—impacting food and everyday goods. Rework your monthly budget to accommodate higher prices.
• Check Your Payslip
• Even if your salary hasn’t increased, you could end up paying more tax due to unadjusted income brackets. Review your payslip and consider speaking to a tax professional to understand your take-home pay.
• Track Your Spending Closely
• As indirect costs climb, it’s more important than ever to monitor your daily expenses. Use budgeting apps or spreadsheets to stay in control of your money and avoid overspending.
• Avoid New Debt Unless Necessary
• With interest rates still high and inflation eating into your income, taking on new credit can worsen your financial position. Focus on managing existing debt and building a small emergency buffer if possible.

* Alexanderson is the head of National Debt Advisors.

PERSONAL FINANCE