Finance Minister Enoch Godongwana opened his budget speech with a public apology to both Parliament and the people of South Africa, acknowledging the delays in the presentation of the national budget, Cape {town} Etc reports.
He referred to the postponement as ‘a regrettable but perhaps understandable feature of multiparty governance.’
In his address, Godongwana provided a blunt overview of South Africa’s economic situation, stating that the country’s economy has stagnated for over a decade. He pointed out that, over this period, GDP growth has averaged less than 2%, far below the levels needed to meet the growing demands of the country. ‘The truth is that our economy has stagnated for over a decade,’ Godongwana stated, emphasising the urgent need for economic growth.
One of the key proposals announced in the budget was a VAT increase. For those looking ahead, the finance minister proposed an increase in the VAT rate by 0.5% in 2025/26, followed by another half-point hike in the subsequent year. This would raise the VAT rate to 16% by 2026/27.
#BudgetSpeech2025 https://t.co/lhq0M5HZTO
— The Presidency ?? (@PresidencyZA) March 12, 2025
Godongwana also issued a stark warning about South Africa’s growing sovereign debt. He revealed that debt-service costs would amount to R389.6 billion in the current financial year, translating to 22 cents of every rand raised in revenue. This, he said, is more than the government’s combined expenditure on health, police and basic education. The government’s strategy to alleviate some financial strain includes reducing debt relief to Eskom, aiming to save R20 billion over two years.
The minister praised the government’s Operation Vulindlela initiative, a collaboration between Treasury and the Presidency aimed at fast-tracking structural reforms. He highlighted that the Freight Logistics Roadmap had been approved, allowing for greater private sector participation and enabling third-party access to operators without discrimination.
In terms of technology, Godongwana shared that the cost of a 1.5GB data bundle has decreased by 51%, making data more affordable for individuals and small businesses. He also noted that the introduction of e-Visas has boosted tourism, and investment has become easier.
The minister’s speech was marked by his announcement that public infrastructure spending over the next three years will exceed R1 trillion. The breakdown includes:
- R402 billion for transport and logistics,
- R219.2 billion for energy infrastructure, and
- R156.3 billion for water and sanitation.
Godongwana also discussed improvements in passenger rail, aiming to ensure that commuters at major hubs can catch a train every ten minutes. Furthermore, new regulations for public-private partnerships (PPP) will come into effect on 1 June. These regulations will establish sector-specific PPP units to drive private sector participation and optimise the balance sheets of financially distressed state-owned companies.
The government is also moving forward with plans to engage the market on various lines for ore, chrome, coal, and manganese, and is eyeing the expansion and automation of the ferrochrome and magnetite terminal at the Port of Richards Bay. In 2025/26, the government plans to issue its first infrastructure bond and introduce other innovative financing instruments to diversify infrastructure funding sources.
Regarding the VAT proposal, Godongwana emphasised that the decision was not taken lightly. A second 0.5% VAT increase, originally planned for the following year, may be cancelled if the state secures sufficient funds. He explained that alternatives, such as increasing corporate and personal income taxes, were considered but ultimately deemed less effective. “Increasing corporate or personal income tax rates would generate less revenue, while potentially harming investment, job creation, and economic growth,” he added.
Godongwana also pointed out that South Africa’s corporate income tax collections are already higher than most peer countries, and the top personal income tax rate is already high. The government, he said, cannot afford to take on more debt.
In response to the proposed budget, Democratic Alliance (DA) leader John Steenhuisen tweeted that his party would not support the budget in its current form, citing concerns over the VAT increase and the lack of concrete solutions to South Africa’s economic challenges.
Good afternoon, South Africa. The DA will not support the budget in its current form. We will continue to fight for economic growth and jobs. ??
— John Steenhuisen MP (@jsteenhuisen) March 12, 2025
More updates to follow as the budget speech continues to unfold.
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