Finance Minister Enoch Godongwana’s 2025 National Budget Speech brings a mixed bag for South African small businesses. While there are efforts to stimulate the economy, rising taxes and constrained fiscal space mean SMEs will need to remain agile and proactive to maintain stability and growth.
Here’s a breakdown of the key takeaways and what they mean for your business:
VAT Increase & Consumer Impact
A phased VAT increase of 1% over the next two financial years (taking the rate from 15% to 16%) will likely impact consumer spending, a concern for retailers and service-based businesses. However, the extension of zero-rated items like canned vegetables and certain organ meats will offer some relief to lower-income households.
Tip:
Prepare for shifts in customer behaviour. Consider reviewing your pricing strategy and streamlining costs to absorb potential dips in demand without sacrificing margins.
No Personal Tax Relief
There’s no adjustment to personal income tax brackets or medical aid credits, which means bracket creep is coming. Many employees will feel the pinch, especially those earning inflation-based salary increases.
What this means for you:
Less disposable income among consumers could lead to slower sales. Businesses should focus on loyalty strategies and value-driven offerings to keep customers engaged.
Eskom Debt Relief & Energy Stability
With Eskom’s improved financial position, the simplified debt relief plan is expected to free up R20 billion in savings for the government. While the loadshedding issue isn’t resolved, this move suggests some stability ahead.
Opportunity for SMEs:
Continue exploring alternative energy solutions (like solar), especially with funding partners like Retail Capital offering tailored financing for sustainability upgrades.
Growth Projections Remain Modest
While GDP is projected to average 1.8% between 2025 and 2027, growth remains well below what’s needed for transformation and inclusive development. Debt servicing continues to eat into public spending, with 22 cents of every rand going toward interest payments.
Bottom line:
Small businesses must continue driving innovation and operational efficiency, even in low-growth conditions.
Grants & Social Relief
The extension of the SRD Grant until March 2026 and inflation-plus increases across social grants will support low-income earners, offering some buffer to consumption levels.
Tip:
These measures may help support spending in key sectors like food, retail and services. SMEs should monitor demand shifts in grant-supported communities and tailor offerings accordingly.
Fuel Relief, But Carbon Tax Kicks In
The freeze on the General Fuel Levy and RAF levy provides R4 billion in relief for motorists, but a sharp increase in the carbon fuel levy could drive up logistics and distribution costs in 2025.
Tip:
Review your supply chain and delivery costs now. Lock in favourable contracts or consider more efficient transport routes and partners.
Boost for Small Business and Infrastructure
The Department of Small Business Development is allocating R2.1 billion over the medium term to support about 120,000 competitive small businesses, particularly those owned by women, youth and persons with disabilities in townships and rural regions.
Additionally, the government has allocated R313.7 million to the establishment of SMME hubs to support business expansion. The R1 trillion allocated to infrastructure will be positive for SMEs due to its impact on the infrastructure supply change and because all business will benefit from investment in roads, water management and railways.
Our take:
This is a positive step for inclusive growth, particularly for SMEs ready to tap into support and emerging infrastructure-linked opportunities.
Looking Ahead
With the economic outlook remaining modest and government resources stretched, small businesses will need to continue finding smart, resilient ways to operate. While the Budget Speech highlights some support measures, it’s clear that business owners will need to stay informed, plan ahead and remain adaptable.
