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IOL News
22-05-2025
- Business
- IOL News
Navigating South Africa's Budget 2025: key decisions in a stagnant economy
Explore the challenges and decisions facing South Africa's Budget 2025 as economists debate the implications of fiscal policies amidst a stagnant economy. Image: GCIS South Africa's economic outlook remains bleak, with National Treasury forecasting real GDP growth of just 1.7% over the Medium-Term Expenditure Framework (MTEF) period. Persistent structural constraints, weak investment confidence, and ongoing energy and logistics challenges continue to limit growth, raising serious concerns about fiscal stability. Finance Minister Enoch Godongwana has finally delivered South Africa's 2025 Budget Speech, following two prior setbacks that delayed the announcement. One attempt was blocked by legal action, while the second was derailed by coalition disputes over the now-withdrawn VAT increase proposal. The speech, originally scheduled for earlier this year, faced significant political and legal hurdles as government leaders struggled to find common ground on fiscal policy. Speaking after the tabling of the Budget, Anchor Capital economist Casey Sprake highlighted that the Treasury has had to revise revenue projections downward due to the scrapped VAT rate hike, which was abandoned for political reasons. To compensate, fiscal drag has been applied, meaning personal income tax (PIT) brackets have not been adjusted for inflation. This alone is expected to generate R49.4 billion over the next three years. Additionally, higher excise duties on alcohol and tobacco and a freeze on inflation adjustments to medical tax credits will add R5.8 billion in revenue. In place of the VAT hike, the Treasury has opted for inflation-linked increases to the general fuel levy, a decision seen as less politically contentious, as it spreads the tax burden more broadly. However, not all economists believe the government is making sound fiscal decisions. Theuns du Buisson, an economic researcher at the Solidarity Research Institute (SRI), describes the Budget as a continuation of poor economic policy, predicting ongoing economic stagnation. According to Du Buisson, Finance Minister Enoch Godongwana's approach to redistribution and structural transformation is misguided. 'This is, as always, a poor budget. Simply dividing a shrinking economy by taxing the rich—and, according to the minister, spending 60 cents of every rand on social relief—is not sustainable. It is certainly not something to be proud of,' says Du Buisson. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ He further argues that the income tax threshold unfairly classifies middle-class earners as wealthy. 'People earning just R7,979 per month are classified as 'rich' under this budget, as this is the point at which someone starts paying income tax.' Du Buisson also believes that the absence of a VAT increase is being wrongly framed as a revenue loss, rather than acknowledging the core issue: government spending is rising faster than economic growth. 'The overall tax rate is 25.2% of GDP. The minister needs an extra 1% of GDP to balance the budget. The simple solution? Grow the economy by 4%, and the shortfall disappears,' he argues. While the minister speaks of limited economic growth, Du Buisson contends that government policies are actively restricting growth potential. 'Personal income tax brackets have once again not been adjusted for inflation, shrinking disposable income. On top of that, fuel levies are increasing for the first time in three years, affecting nearly every cost in the economy. How can growth happen without affordable energy and adequate consumer spending?' he asks. Despite concerns around taxation and spending, there is some optimism about private sector involvement in infrastructure development. Solidarity notes that there is increasing space for business-led investment in transport infrastructure, which could help offset logistical inefficiencies that have contributed to the economy's sluggish performance. Meanwhile, UASA, a major trade union, has raised concerns about future tax burdens. 'The minister has noted that the 2026 budget will need to introduce new tax measures to raise R20 billion, which could further squeeze consumers and taxpayers," says Abigail Moyo, UASA spokesperson. Moreover, without a concrete plan for job creation, businesses will struggle to invest, limiting economic expansion and structural reform efforts. Outside of necessary spending allocations for health, education, state-owned enterprises (SOEs), security, and social relief, the Budget fails to offer any meaningful solutions beyond what has been presented in previous years, she says. `PERSONAL FINANCE
IOL News
23-04-2025
- IOL News
Former intelligence officers in court for defrauding state security agency of R5.8 million
Two former senior intelligence officers have been arrested for allegedly defrauding the State Security Agency (SSA) of R5.8 million. Two former senior intelligence officers have been arrested for allegedly defrauding the State Security Agency (SSA) of R5.8 million. Ntshavheni Prince Makhathana and Matome Solomon Ralebipi made their first appearance at the Palm Ridge specialised commercial crimes court on Monday, where their bail was set at R100,000 and R150,000, respectively. They were released on strict bail conditions and ordered to surrender their travel documents, they should not leave their residential addresses with the exception of consultations with their attorneys and getting medical attention. Furthermore, they have been ordered not dispose their immovable assets and should report to their nearest police stations every Friday, and they should not have any direct or indirect contact with the state witnesses. Makhathana, a former manager of the Cover Support Unit (CSU) of the then National Intelligence Agency (NIA) now SSA, was responsible for all its operations and financial expenditure, together with his co-accused, Ralebipi, a former agent of the NIA.
