21 MAY 2025
The Federation of Unions of South Africa (FEDUSA) expresses deep concern over the 2025 National Budget – Budget 3.0 – tabled by Finance Minister Enoch Godongwana earlier today, 21 May 2025. While the budget may appear to respond to public outcry by affirming the halting of the formerly proposed VAT increase, FEDUSA is clear that the current budgetary stance remains contractionary, disproportionately regressive, and structurally unjust. It reproduces the same fiscal posture that has failed to create jobs, reduce poverty, or drive inclusive growth for over a decade.
Austerity by Another Name
FEDUSA reiterates its rejection of austerity as a misguided response to structural fiscal and economic challenges. Despite Minister Godongwana’s assertion that “this is not an austerity budget,” among other reassurances that spending was not being cut, Budget 3.0 reflects a policy of fiscal consolidation that narrows additional spending by R68 billion over the medium term, mostly through the withdrawal of unassigned provisional allocations and the freezing of baseline increases across all spheres of government.
This attempt at belt-tightening comes at a time when the public sector services in the country are already overstretched, underfunded and understaffed. We reject the underlying premise that the country has a spending problem. South Africa has a growth and revenue problem, and that requires strategic investment in labour-intensive sectors, not a further suffocation of the state.
Regressive Tax Instruments and the Burden on Workers
FEDUSA warned ahead of the budget that the reversal of the VAT increase must not be offset through other regressive measures. Yet Budget 3.0 has done exactly that. The failure to expand the zero-rated VAT basket, a commitment that was introduced to cushion poor households from the proposed VAT hike in the past budget presentation, constitutes a betrayal of those most affected by rising food and transport costs. These are the workers, the poor and the lower middle class urban poor who barely survive the current cost of living crisis.
The inflation-linked increase to the general fuel levy (16c/l for petrol and 15c/l for diesel), effective 4 June 2025, will deepen these cost-of-living pressures and erode already fragile household incomes. For working people who rely on transport to access workplaces and education, and for those in rural and peri- urban areas facing energy and food insecurity, this increase is punitive and unjustifiable.
Instead of relying on consumption taxes, the government should have introduced progressive tax measures, including a wealth tax on high-net-worth individuals, windfall taxes on extractive industries, and stronger enforcement against corporate profit-shifting and illicit financial flows.
Infrastructure Investment Without Industrial Anchoring
FEDUSA cautiously welcomes the commitment to invest over R1 trillion in infrastructure over three years, with significant allocations to energy (R219.2 billion), logistics (R402 billion), and water (R156.3 billion). However, the budget fails to ensure that these investments are tied to job creation, local industrial development, and public sector capacity-building. Investment without the strategic alignment of infrastructure and procurement with local industrial development goals will not yield the desired outcomes. All investment must be tied to growth and job-creation.
Allocations to PRASA, SANRAL, and Transnet must be conditional on clear job targets, skills development, and localisation of inputs. We further call for full transparency in procurement processes to prevent the capture and fraudulent outsourcing that has plagued public infrastructure projects in the past.
No Clear Jobs Plan During a National Employment Crisis
With unemployment at 32.9% and youth unemployment above 50%, FEDUSA is disappointed that Budget 3.0 fails to deliver a bold and coordinated employment strategy. Meanwhile, the provision of a job seeker’s grant remains a pipedream. The extension of the SRD grant to March 2026 is necessary and welcomed.
Climate Finance and the Just Transition: A Missed Opportunity
The budget makes no significant provision for leveraging climate finance to support localised green industrialisation. This omission is at odds with the commitments made under South Africa’s Just Transition Framework and the broader imperative to diversify the energy economy in ways that benefit communities, workers, and small businesses. FEDUSA calls for clear financing strategies to support green jobs, community energy schemes, and equitable access to the renewable energy value chain.
Fiscal Policy Must Enable Development
Budget 3.0 once again reduces fiscal policy to a narrow balancing act, rather than a developmental instrument. Treasury must reorient itself from being an institution of restraint to one of facilitation, enabling inclusive growth, equitable redistribution, and state-led industrial transformation.
We urge the government to align fiscal decisions with the constitutional imperatives of social justice, human dignity, and redress. The real test of a budget is not its macro-balance sheet but whether it responds to the material needs of the people and expands the capabilities of the state to deliver these.
FEDUSA believes Budget 3.0 offers stability for the markets but not security for the people. It signals continuity in a policy posture that has failed to generate inclusive growth, build a capable developmental state, or empower workers and communities.
FEDUSA will continue to engage at NEDLAC and other social dialogue platforms to advocate for a more progressive, transparent, and transformative fiscal path.
END.