Basic education and health see gains, but austerity still prevails. The 2025 Budget maintains real investment in basic education and health care, reflecting a welcome stated commitment to funding these constitutionally protected rights as priorities. While this is a necessary step toward strengthening essential services; it comes at a cost. The increases are funded through a 0.5% VAT hike this year and another 0.5% next year, alongside reduced contingency reserves and no adjustments to personal income tax brackets. The VAT hike shifts a substantive burden onto lower-income households while failing to pursue more progressive revenue measures.
Moments like this reflect the necessity to prioritise progressive revenue generation, more robust tax enforcement, and enhance the capacity of our developmental state to ensure that every Rand collected and spent directly benefits the people. To ensure that these investments have real impact, funding must reach its intended beneficiaries by addressing underspending and eliminating wasteful expenditure; otherwise, it risks deepening inequality while failing to deliver meaningful improvements in education and health care.
Education reform backed by resources
Last year, we lamented the Medium-Term Budget Policy Statement (MTBPS) R1.2 billion reduction to Basic Education funding as constraining the provinces’ ability to provide quality basic education and would exacerbate overcrowding and dilapidated school infrastructures. However, this year’s Budget tells a completely different story, with Basic Education receiving a whopping 7.6% increase to R349.5 billion from last year’s R324.9 billion. As a 2.8% real increase, this reflects some of the largest investments to basic education over the past decade and if wielded effectively, may better resource provinces to address overcrowded classrooms, school infrastructure backlogs and chronic teacher shortages than in previous years.
Early Childhood Development (ECD) was the real winner in this budget. Funding for ECD has increased by R2.9 billion, rising from R10.6 billion in 2024 to R13.6 billion this year. This 27.8% year-on-year increase is a welcomed allocation, reflecting a crucial step toward expanding access and improving the quality of early learning programs across the country. However, the modest R69 million increase (1.9%) for workbooks and learning materials falls short, translating to a real decline of 3.5% after accounting for 4.7% CPI inflation. This shortfall risks undermining efforts to improve education quality and may place additional strain on provincial budgets, which could be forced to cover the gap in learning support materials.
If South Africa is to break cycles of poverty and inequality and build an inclusive and thriving economy, our government must ensure that every child has access to a well-resourced school with trained teachers and adequate learning materials. It is now imperative that this increased funding is spent effectively, transparently, and in a way that directly benefits learners by addressing infrastructure backlogs, reducing classroom overcrowding, and ensuring access to essential learning materials. However, we must remain mindful that this budget still reflects an austerity approach as the increases in education funding are being financed through a regressive VAT hike that disproportionately impacts the poor rather than through more progressive taxation measures that are more distributive by nature.
A better-resourced chance at scaling universal health coverage
Overall, health has been allocated its highest allocation since the Covid-19 pandemic – R298.9 billion, a 7.8% increase from last year’s R277.2 billion. This allocation places real investment behind promises to widen the access to quality health care in our country. Translating to a real increase of 3% after accounting for the CPI inflation for 2025/26 of 4.7%, this is the first time we have seen a real investment in health since the 2021/22 Budget. Due to the increase in population numbers and inflationary effects, healthcare spending per user increases in nominal terms from R5 345.71 to R5 511.60 but decreases from R5 595 to R5 512 in real terms. Health inflation has historically tended well above inflation, which should be considered when engaging budget allocations.
Good news for the Health Facility Revitalisation Grant – which upgrades failing clinics and hospitals – as it sees its first nominal increase of 1.2%, its first increase since the 2023/24 cost containment measures that cut its budget by 5.2% (R440 million) and 2024/25’s cut of R1.2 billion. Though this is a real decrease, it is an improvement to funding patterns of the past. In the context of clinics and hospitals damaged by storms and other extreme weather events, resourcing provinces to repair damaged health facilities may chart one step forward in more climate-resilient healthcare facilities.
Meanwhile, compensation for healthcare workers has received a welcomed increase to R194 billion from R179 billion – an 8.2% increase that could aid in addressing staff shortages. This is but one step as there is uncertainty over whether all unplaced medical graduates will be absorbed.
While this budget marks an important step in expanding access to health care, the reliance on a VAT increase to fund it places an unfair burden on lower-income households, making the path to universal health coverage more costly for those who can least afford it.
Revenue and Fiscal Choices: A More Equitable Approach is Needed
The decision to increase VAT by 0.5% in each of the next two years demonstrates an ongoing challenge of balancing revenue generation with economic equity, ensuring that fiscal policies do not disproportionately burden lower-income households while still meeting the state’s financial obligations. VAT is a regressive tax that disproportionately affects lower-income households who spend a larger portion of their earnings on essential goods and services.
We have also seen through the first VAT increase in 2017 that regressive taxes don’t yield the imagined outcomes but certainly stifle economic growth because of price increases and weakened capacity by the tax base to participate in the economy.
It is crucial that this funding reaches its intended beneficiaries by overcoming underspending and wasteful expenditure; otherwise, it risks becoming a punitive budget that burdens the poor without delivering meaningful improvements in education and healthcare.
Civil society has consistently called for alternative revenue measures including:
- Strengthening tax compliance and enforcement to curb tax evasion and illicit financial flows;
- Progressive tax reform to ensure all contribute their fair share;
- Increasing the Health Promotion Levy, a levy on sugary drinks that both adds much-needed revenue to the fiscus and decreases consumption of health-harming products;
- Expanding the tax base through inclusive economic growth rather than relying on regressive taxation.
A Step Forward in Gender Responsive Budgeting?
For years, gender-responsive budgeting (GRB) has been promised but not meaningfully implemented. While this budget includes a Gender Budget Statement that acknowledges the economic challenges faced by women and girls, a meaningful commitment requires targeted investment in education and health. It must also recognise and address the disproportionate burden of unpaid care work that women perform, whether in households, early childhood education, or health care. Without this, young women and girls who bear the brunt of poverty, unemployment, and school dropouts due to teenage pregnancy will continue to be left behind.
A Budget for the Future Must Prioritise Human Rights
This Budget reflects a pivotal moment for South Africa. The fiscal policy choices made today will determine whether we build a more inclusive, equitable future or continue down a path of deepening inequality and underfunded public services.
SECTION27 calls on the government to:
- Ensure that increased education and health care funding directly benefits learners and patients by addressing underspending and eliminating wasteful expenditure.
- Ensure that revenue generation does not come at the expense of the poor by strengthening enforcement against tax evasion, adopting more progressive tax measures and increasing the Health Promotion Levy.
- Government must explore/strengthen systems to mitigate corruption and underspending by provincial departments through strengthening capacity and oversight
- Commit to meaningful GRB by reflecting on gender impacts of investments in education and health care services, addressing the burden of unpaid care work, and ensuring that budget allocations actively reduce gender inequality rather than reinforce it.
Budgets are more than financial statements, they are blueprints for our country’s future. A truly people-centred budget must invest in human dignity.
The European Union funding supports SECTION27 and the Centre for Child Law’s work in enhancing accountability in health and education in South Africa.
For media inquiries please contact:
Pearl Nicodemus | 082 298 2636 | nicodemus@section27.org.za
About SECTION27
SECTION27 is a public interest law centre using legal, advocacy, and research strategies to promote and advance human rights in South Africa. Our work focuses on the rights to healthcare and basic education, ensuring that constitutional obligations are met, and that all South Africans have access to quality public services.
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