Star 2025-03-13

VAT will be raised by 0.5% this year and by 0.5% the year thereafter, but a range of measures have been proposed by the government to alleviate the impact of these increases on lower-income households. The National Treasury had earlier this year proposed a 2% increase from the current 15% VAT rate, but the proposal was shot down by the political parties in the Government of National Unity due to the potentially severe impact on lower-income groups. Consequently, the February Budget was postponed until Wednesday so that other ways could be found to increase government revenues. In addition, the government has decided not to adjust the personal income tax brackets and rebates for inflation in 2025/26, which will see employees paying more tax. Finance Minister Enoch Godongwana said in a…

Infrastructure investment received R46.7 billion in additional government funding in Wednesday’s Budget, which will form part of R1.03 trillion planned to be spent over three years. This investment aims to speed up economic growth, financial inclusion, and infrastructure development. Finance Minister Enoch Godongwana said R402bn will be spent on transport and logistics, R219.2bn on energy infrastructure, and R156.3bn for water and sanitation. In transport, the SA National Roads Agency will spend R100bn to keep the roads in good condition. Big infrastructure spending plans have been a feature of the government’s Budget in recent years, but delivery has fallen far short of the plans. This has severely reduced activity levels for the engineering and construction sectors, contributing to the steady degradation and backlogs in infrastructure. According to the Budget Review, between…

GDP growth has averaged less than 2%, far below the level required to meet our expanding list of needs Finance Minister Enoch Godongwana delivered a pivotal Budget Speech aimed at steering South Africa towards economic recovery and inclusive growth amidst fiscal deterioration and rising debt levels. With the country grappling with stagnated economic growth and pressing social needs, Godongwana’s address presented a mixed bag of fiscal discipline, significant infrastructure investment, and unpopular revenue-enhancing measures. Godongwana said the reality of a mere 0.6% gross domestic product (GDP) growth in 2024 and the expectation of a 1.8% growth over the medium-term stressed an urgent need for structural reforms and macroeconomic stability. “A bigger, faster growing economy, and the larger fiscal resources that comes with it, would give us more fiscal room to…

There were angels lurking in the detail of South Africa’s delayed March 2025 Budget. While most attention focused on the scrapping of the 2 percentage point rise in the VAT rate proposed in February 2025 - replaced by a phased increase of half a percentage point this coming fiscal year and another half in the following year - some gems were hiding in the 273-page Budget Review. In my opinion, the standout revelation was the notable decline in irregular expenditure at the provincial level, dropping from R55 billion in 2022/23 to R20.7bn in 2023/24. Unauthorised expenditure also fell, from R3.1bn in 2022/23 to R2.2bn in 2023/24, while fruitless and wasteful expenditure decreased sharply from R626.6 million in 2022/23 to R193.1m million in 2023/24. Another major highlight is that the…

Finance Minister Enoch Godongwana has announced that the National Treasury will embark on a significant overhaul of the nation’s budget process. This initiative aims to reassess the foundational assumptions that guide budget allocations, with the goal of optimising public expenditure and ensuring it aligns more closely with the current needs of the country. The announcement comes amid concerning projections regarding the country’s financial health, with gross government debt expected to reach R5.69 trillion - approximately 76.1% of the gross domestic product (GDP) - this year. The debt levels are anticipated to stabilise at 76.2% of GDP by the fiscal year 2025/26. In tandem, debt-service costs are projected to surge from R389.6 billion in 2024/25 to R478.6bn by 2027/28, comprising roughly 21.7% of revenue in 2024/25. Godongwana said the proposed budgetary…

South Africa’s 2025 Budget Review revealed a mild near-term fiscal slippage, with a weakening in the government’s debt-to-GDP projections and fiscal deficits, before reverting to previous forecasts of fiscal consolidation. Gross government debt is consequently now projected to stabilise at 76.2% of gross domestic product (GDP) in 2025/26, up slightly from the earlier estimate of a peak at 75.5% in the same year, as outlined in last year’s Medium-Term Budget Policy Statement (MTBPS). The rand showed little reaction, hovering around R18.40 against the dollar following the Budget announcement. The budget deficit for 2025/26 is now estimated at -4.6% of GDP, widening from the prior forecast of -4.3%, though it is expected to narrow to -3.5% by 2027/28. VAT has risen by 0.5%, with no adjustment for fiscal drag. The National…