2025 Budget Speech: Economy Expert Says South Africa Needs More Economic Growth, Not Tax Increases

• The Budget Speech was cancelled after the Government of National Unity (GNU) partners failed to agree on the budget's contents
• Enoch Godongwana will finally deliver the 2025 Budget Speech on 12 March 2025 to the National Assembly at the Parliament Dome in Cape Town at 2 pm
• The Finance Minister has a tough task of trying to cover a shortfall without putting more strain on the economy by increasing Value-Added Tax (VAT)
• Economy expert Maarten van Doesburgh spoke to Briefly News about the upcoming speech and what he expected

Briefly News journalist Byron Pillay has spent a decade reporting on the South African political landscape, crime and social issues. He spent 10 years working for a community newspaper before transitioning to online.

WESTERN CAPE — The 2025 Budget Speech is set to be delivered on 12 March 2025 at Parliament in Cape Town, but questions remain about its contents following the initial postponement.

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The speech was originally scheduled for 19 February but was cancelled at the last minute after the Government of National Unity (GNU) partners failed to agree on the budget's contents. A proposed 2% Value Added Tax (VAT) hike was reportedly the major source of contention, with some cabinet members refusing to agree to the budget as long as the proposed 2% remained.

Speaking to Briefly News ahead of the speech that was supposed to have taken place on 19 February, economy expert Suvira Singh noted that there was a lot of volatility and uncertainty following Donald Trump’s election, which then made it difficult to deduce concise conclusions about how the USA's stance would affect South Africa. The US President has since cut all funding to the country.

Cabinet members finally reach an agreement

Cabinet members also failed to agree to the contents of a reworked budget, leaving Finance Minister Enoch Godongwana scrambling to come up with another solution.

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With cabinet reportedly reaching an agreement on how to tackle the shortfall in the budget, all eyes are on 12 March to see what the new speech entails.

Maarten van Doesburgh is particularly keen to see what unfolds, especially after the late cancellation of the first speech after everyone had gathered at Parliament. The Head of Economics at the Cape Peninsula University of Technology spoke to Briefly News about the upcoming speech and what he expected it to entail.

VAT hike not completely ruled out

Touching on the proposed VAT increase that caused much debate the last time, Mr van Doesburgh noted that a hike was not completely ruled out. He added that a 0.75% increase was being discussed, but cautioned that any increase would be bad.

“An increase in VAT or any taxes is going to have a negative impact on the economy,” he said.

South Africa’s VAT rate is currently 15%. The last time it was increased was in 2018 when then Finance Minister Malusi Gigaba increased it by 1 point.

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The 15% is in line with other countries in the region, as Namibia and Zimbabwe have the same rate, while Mozambique is 1 point higher at 16%. Botswana’s VAT rate currently sits at 12%.

Government needs efficient and effective expenditure

During the failed meeting to discuss the reworked budget speech on 25 February 2025, it was reported that in place of a VAT hike, the government would cut expenditure to areas such as education and defence.

For Mr van Doesburgh, this is a terrible idea.

“To me, it’s not about cutting expenditure. To me, it’s about more efficient and effective expenditure,” he said.

He explained that most government departments were underfunded, so there needed to be more responsible spending with corruption and wasteful expenditure being done away with.

“We need a growth-oriented budget without a doubt. This country is in a dire economic position, with practically zero economic growth and high unemployment.”

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He added that he hoped there would be more emphasis on accountability and responsibility going forward from state departments, saying that government needed to be run like a fine-tuned business.

Gondongwana’s biggest challenge is how to balance the budget

Mr van Doesburgh also weighed in on the challenge the minister had of trying to balance the budget, saying that there were two ways of doing that. One was increasing revenue and the other was improving profitability and efficiency in government spending.

With regards to increasing revenue, he noted that it involved increasing taxes like VAT, which hit the poor the hardest.

“In real terms, it affects the poorer communities more than the higher-earning and wealthier communities. So, it’s a problem. We don’t want to see that,” he exclaimed.

He added that borrowing was also out of the question.

On the government spending side, Mr van Doesburg noted the high state wage bill with concern, saying it needed to be slashed.

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He conceded that whenever this happened, the unions were up in arms and reacting accordingly. He also added that there needed to be more private investments, whether it be local or international, in the economy. He expressed concern that to do that, corruption needed to be eliminated.

“Again, we are not seeing these big statements made by our leaders encouraging and creating a climate. Investors will only invest in a climate that is positive and conducive to investment.”

A budget that stimulates the South African economy

Mr van Doesburg noted that while budgets were often a political tool, he believed that the whole country has realised that South Africa has to get the economy going.

“We need a budget that will stimulate the South African economy.”

He stated that there had to be a turnaround from the president right down to the ministers, where there was just a focus on becoming more efficient, more productive and more profitable.

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Finance Minister considering cutting Social Relief of Distress (SRD) grants

In a related article, Enoch Godongwana considered scrapping the COVID-19 Social Relief of Distress (SRD) grant to save the country money.

Briefly News reported that the Finance Minister stated that scrapping the grant would mean there was no need to increase taxes in the budget.

South Africans weighed in on the issue, suggesting that the government cut the size of the bloated cabinet to save money instead.

Proofreading by Roxanne Dos Ramos, copy editor at Briefly.co.za.

Source: Briefly News