Key Budget highlights: Early retirement, health funding, and VAT changes

R11 Billion to pay for early retirement of at least 30 000 government employees; R941.5 billion to support the equitable provision of public health services; and cuts to social grants over the next three years are among the big decisions announced by Finance Minister Enoch Godongwana as he tabled his 2025/26 budget. 

This comes as the National Treasury revised the initial proposal of a 2% increase in VAT to the now proposed 0.5% increase for the next two years.

Tabling the budget, Godongwana revised the grant increase allocations downward compared to what was proposed in the postponed budget.

Godongwana said the social grants were allocated R284.7bn in the new financial year.

The grants will be increased as follows in April:

* The old age and disability grant increase by R130 to R2 315,

* Child support grant rises by R30 to R560 a month, and

* The foster care grant increases by R70.

Godongwana announced that R941.5bn has been allocated over the medium-term expenditure framework (MTEF) to support the equitable provision of public health services, including free primary healthcare.

About 44.7% of the R941.5bn allocation for health is directed to funding district health services, particularly primary healthcare facilities such as clinics and community health centres, which also provide outreach services.

"This level of care is recognised as the most efficient and effective due to its focus on disease prevention and proximity to communities. Almost 98% of the budget for this function is allocated to provinces, amounting to about R922.7bn," Godongwana said.

In order to keep 9 300 healthcare workers in hospitals and clinics, they have added R28.9bn to the health budget.

It will also be used to employ 800 post-community service doctors and to ensure that pharmacies don't run out of medicines.

Godongwana told Parliament on Wednesday that the government was reactivating early retirement of public sector employees without penalties to help manage wage costs, with the National Treasury setting aside R11bn to pay for early retirement of at least 30 000 government employees over the next two fiscal years in a bid to manage the public sector wage bill.

"An amount of R11bn is provisionally allocated over the next two fiscal years for the early retirement initiative, whose intention is to attract younger employees into the public service," Godongwana said.

"The interventions on the wage bill are aimed at ensuring that when key frontline staff are lost through natural attrition and retirement, sectors are able to fill vacant posts to keep services running effectively."

Meanwhile, the DA announced its intention to withhold support due to the proposed 0.5% increase in VAT. 

DA leader John Steenhuisen, speaking after Godongwana's budget speech, said they would not be voting for the budget in its current form.

“We have been very clear from the beginning that we don’t believe a VAT increase is the right way to proceed especially if it is not accompanied with bold economic reforms and focus on economic growth,” Steenhuisen said.

UDM parliamentary leader Nqaboyomzi Kwankwa said it was difficult not to support the budget.

“One has to take a decision that takes the county forward. We are not happy with some of the proposals,” said Kwankwa, adding that crafting a budget was a balancing act.

 Cosatu parliamentary counselor Matthew Parks said the labour federation was disappointed by the VAT increase proposal.

“This is to make the life more difficult for people who drown in debt, who are straining to survive with the cost of living,” he said.

Cape Argus