South Africa’s Finance Minister, Enoch Godongwana, is set to unveil the revised 2025 Budget on 12 March – a crucial moment as the government grapples with the tricky task of increasing spending while keeping debt under control.
This budget is crucial because the government is trying to balance the need to spend more money on important projects while also managing the country’s growing debt.
According to Investec, key areas of focus will include the increase in new spending, proposed tax hikes to fund this spending, and the implications for economic growth.
The February 2025 Budget bombed due to a proposed 2 percentage points increase (from 15% to 17%) in VAT aimed at financing an increase in non-interest spending.
The ANC was forced to negotiate with its partners in the government of national unity (GNU). The Democratic Alliance is standing firm on a zero vat increase. Other political parties have also opposed the VAT increase.
Three key POINTS to watch for in the Budget Speech 2025
Tax Changes
Will Finance Minister Enoch Godongwana go ahead with the proposed VAT increase by 2 percentage points?
This is expected to raise about R191 billion over three years, according to Investec. This could put more pressure on middle- and high-income earners.
Watch for any adjustments to personal income tax brackets or corporate tax rates.
Government Spending
The budget aims to balance increased spending while keeping debt under control.
Key areas to watch include compensation for public sector workers, infrastructure projects (like railways and roads), and social grants — particularly the permanent social grant introduced during COVID-19.
Debt and Economic Growth
South Africa’s debt is sitting at 76% of GDP, and debt servicing costs are eating into tax revenue.
The Treasury aims to maintain a budget surplus of 0.5% of GDP, but experts question whether the proposed spending will effectively boost economic growth, projected at a modest 1.6% for 2025.
Investec Treasury Economist, Tertia Jacobs said the proposed February Budget Review 2025 indicates that the proposed spending and tax increases are unlikely to support an acceleration in GDP growth.
The revised Budget Speech 2025 aims to balance increased spending with proposed tax hikes, particularly a VAT increase. This could stabilise debt levels and maintain a primary budget surplus.
However, concerns remain about the effectiveness of these measures in stimulating economic growth and the potential burden on taxpayers.
What concerns you most about the SA Budget 2025?
Let us know by leaving a comment below or send a WhatsApp to 060 011 021 1.
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