The announcement of a VAT increase in the 2025 Budget, presented on March 12 by Finance Minister Enoch Godongwana, has disappointed tourism stakeholders, according to TravelNews. While the increase—rising in two phases to reach 16% by 2026/27—adds financial strain to the sector, the government’s commitment to infrastructure investment offers a silver lining.
Finance Minister Enoch Godongwana. (Picture: Phando Jikelo / RSA Parliament)
Godongwana revealed that public infrastructure spending over the next three years would exceed R1 trillion, with 77% allocated to transport, logistics, energy, and water and sanitation. FEDHASA Chairperson Rosemary Anderson emphasized that improved infrastructure could alleviate the service delivery challenges that burden hospitality businesses.
‘If the money is spent appropriately, we hope to see significant improvements in service delivery and in the towns welcoming tourists,’ she said.
Rhino Africa CEO David Ryan highlighted the crucial link between functional infrastructure and tourism. ‘Tourism thrives where infrastructure works. Poor road conditions have negatively impacted visitor numbers to attractions such as the Blyde River Canyon and Dullstroom,’ he noted.
Despite this optimism, Anderson warned that the VAT hike would drive up costs for both operators and tourists, making South Africa a pricier destination. The increase is expected to generate an additional R42 billion in revenue, which the government says will fund social protection, public services, and infrastructure development.
ALSO READ: New nature reserve declared in Northern Cape
