The National Treasury is set to implement a significant reduction in government spending totalling R68 billion over the next three years.
This decision follows an extensive spending review of R300bn, aimed at addressing inefficiencies in public expenditure as the country grapples with fiscal constraints in the absence of new tax revenue.
Tabling the 2025 Budget Review before Parliament on Wednesday, Finance Minister Enoch Godongwana emphasised that the government’s strategy prioritised fiscal discipline while simultaneously investing in growth.
The reviews identified billions in potential savings from underperforming programmes, allowing for redirecting funds towards more effective initiatives.
Godongwana said the National Treasury’s strategy of maintaining fiscal discipline while investing in growth demanded that it prioritised high-impact expenditures, those that deliver economic returns while eliminating inefficiencies, wastage and leakage that too often plague government’s spending.
“To tackle this, the National Treasury has undertaken expenditure reviews looking at more than R300bn in government spending since 2013, with the aim of identifying duplications, waste and inefficiencies,” he said.
“We found potential savings of R37.5bn over time through improved oversight and operational changes through these reviews. Going forward, underperforming programmes will be closed as the 2026 Medium-Term Expenditure Framework (MTEF) budget process undergoes redesign.”
Godongwana said the Treasury had managed to introduce spending cuts without compromising the fiscal strategy of sustainable public finances.
“We have achieved this difficult balance by reducing additional spending over the medium term by R68bn. These reductions are primarily aimed at provisional allocations not yet assigned to votes. Simply put, this means baseline allocations across all spheres of government remain largely unchanged,” Godongwana said.
“Instead, the size of the proposed increases to allocations is reduced, in line with what we can afford. Our focus going forward is threefold: balancing the budget through spending efficiencies, strengthening revenue collection, and giving expression to the Medium-Term Development Plan.
“This undertaking is not insurmountable if we work together, stay focused, and persevere to chart a better course for our economy and our people.”
Following a two-month long debate, Godongwana provided clarity, sayign that VAT will remain at 15%, a decision he claimed reflects the governent’s commitment to listen to South Africans, and to all the political parties represented in Parliament.
“The reality, however, is that the decision to do away with the VAT increase, without a viable alternative source of revenue, significantly reduced our ability to fund additional government programmes and projects to the extent we had deemed necessary,” Godongwana said.
“Nevertheless, this budget supports sustainable finances, the social wage and investments in economic growth. This is not an austerity budget.”
Godongwana said work was under way to enhance the budget process – the foundation for sustainable public finances – and improve the efficiency and effectiveness of public spending.
He said this included the fiscal anchors reform and the early retirement initiative that were outlined in the 2024 MTBPS and March 2025 Budget Review.
According to the Budget Review 2025, the consolidated government expenditure increases at an annual average of 5.4%, from R2.4 trillion in 2024/25 to R2.81trln in 2027/28.
Over the MTEF period, excluding payments for servicing debt, the contingency reserve and provisional allocations, 48.3% of nationally raised revenue is allocated to national government, 42% to provinces and 9.7% to municipalities.
Over the three-year period, consolidated spending has been revised down by R69.4bn.
The changes are concentrated in provisional allocations, which are revised from R204.8bn to R141.8bn. Treasury said departmental baselines were largely not affected.
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