By Yolandi Esterhuizen, Director of Global Product Compliance at Sage Africa & Middle East and Registered Tax Practitioner
The 2025 Budget Speech delivered by Finance Minister Enoch Godongwana highlighted significant fiscal measures aimed at addressing South Africa’s economic challenges. The budget highlighted the government’s commitment to macroeconomic stability, revenue generation, and technological advancements.
As a leader in business solutions, Sage explores the key takeaways from the budget, particularly focusing on tax, VAT, and the role of technology in shaping the future of financial compliance and efficiency.
VAT Increase – A Necessary Trade-Off?
One of the most debated measures in the budget is the proposed increase in value-added tax (VAT). The government announced a gradual VAT rate increase: a 0.5% rise in 2025/26, followed by another 0.5% in 2026/27, bringing the final rate to 16%. This move is expected to generate additional revenue of R28 billion in the upcoming fiscal year and R14.5 billion in the subsequent year.
From a business perspective, this increase will have implications for both consumers and businesses. While VAT remains one of the more efficient forms of taxation, its regressive nature means lower-income households will bear a proportionally higher burden. The government’s effort to mitigate this impact by expanding VAT zero-rated food items (including canned vegetables, dairy liquid blends, and certain organ meats) is a welcome measure. However, businesses must prepare for the operational adjustments required to accommodate the new tax rate.
Technology as an Enabler of Compliance and Efficiency
A key takeaway from the budget is the increasing role of technology in improving tax compliance and revenue collection. SARS has been making strides in digital transformation, leveraging data analytics and automation to identify non-compliance and streamline tax administration. This signals an opportunity for businesses to digitally future proof their business by investing in digital financial management solutions to ensure compliance with evolving regulations.
At Sage, we believe that technology will play a pivotal role in helping businesses adapt to these changes. Cloud-based accounting and VAT management tools can simplify tax calculations, automate reporting, and reduce errors. With real-time data access and AI-driven insights, businesses can enhance their financial planning and compliance, ensuring they remain aligned with SARS’ digital initiatives.
Effectiveness Under the Government of National Unity (GNU)
The implementation of these fiscal measures occurs under the newly established Government of National Unity (GNU), a coalition-driven governance model that brings together diverse political stakeholders. While the GNU presents an opportunity for more inclusive decision-making, its effectiveness in executing economic policies remains to be tested.
The VAT hike and tax adjustments reflect the government’s attempt to balance fiscal sustainability with social priorities, but challenges may arise in policy consistency, bureaucratic efficiency, and stakeholder alignment within the GNU framework. Businesses must remain agile, as shifting political dynamics could influence regulatory enforcement and economic strategies. However, if the GNU successfully fosters collaboration and policy stability, these tax changes could provide a more predictable economic environment for businesses to operate and grow.
Preparing for the Future
As South Africa navigates its fiscal challenges, businesses must remain proactive in their approach to tax planning and compliance. The VAT increase, coupled with enhanced enforcement by SARS, emphasises the need for accurate financial reporting and robust accounting systems. Embracing technology-driven solutions will be key to staying ahead in an evolving regulatory environment.
Sage remains committed to empowering businesses with the tools they need to thrive in this dynamic landscape. As fiscal policies shift, leveraging innovative financial technologies will not only ensure compliance but also drive efficiency and growth.
For expert insights on tax compliance and financial management solutions, visit Sage’s official website: Tax Year-End | Sage South Africa. Stay ahead of the changing tax landscape with the right tools and guidance.
About Sage
Sage exists to knock down barriers so everyone can thrive, starting with the millions of Small and Mid-Sized Businesses served by us, our partners and accountants. Customers trust our finance, HR and payroll software to make work and money flow. By digitising business processes and relationships with customers, suppliers, employees, banks and governments, our digital network connects SMBs, removing friction and delivering insights. Knocking down barriers also means we use our time, technology and experience to tackle digital inequality, economic inequality and the climate crisis.
