Pressure mounts on Godongwana ahead of 2025 Budget Speech

Budget Speech

Cape Town — Ahead of Finance Minister Enoch Godongwana’s first Budget Speech under the Government of National Unity (GNU), there is mounting pressure on him to not increase taxes.

Several opposition parties united under one theme ahead of the Budget Speech and that was for Godongwana not to increase taxes for the upcoming financial year as many South Africans are already under increasing economic pressures as is.

According to IOL, Godongwana will deliver his speech following the US’s decision to cut all funding to South Africa, including HIV/AIDS relief. Economist Dawie Roodt said this year’s budget speech comes at a time when the economy was not doing well.

“It is doing quite badly in fact. We have this new variable, which is the name of Donald Trump,” Roodt said.

He said South Africa’s fiscal account was in trouble as the debt was on the rise, and was compounded by the demands placed on Godongwana by state-owned enterprises (SOEs) to collapsing municipalities, civil servants wanting salary increases and millions of people depending on state income.

Roodt speculated that, despite calls from opposition parties not to increase taxes, it was on the cards, and said sin taxes and fuel levies were likely to increase. He was also eager to see Gdongwana’s targets for economic growth.

“I don’t see the economy growing by more than 1.5%. The President cites 3%, but that is not going to happen. Let’s see if the Minister agrees with the President,” he said.

According to TimesLIVE, economists from law firms Norton Inc., Avias Ngwenya and Marylla Govender, said various tax increases were expected during the Budget Speech.

They said the tabling of the budget comes as the economy faces a “perfect storm” with high levels of unemployment and low levels of economic growth. Among the issues, South Africa faces include an increasing social grant burden, a high debt-to-GDP ratio, extreme levels of youth unemployment and poor-performing state-owned entities.

Social development expenditure, which supports more roughly 28 million South Africans, accounted for R387 billion of the 2024.25 budget, which was only surpassed by the R480 billion spent on learning and culture.

The R370 Social Relief Distress (SRD) Grant is likely to cause an extra burden on the economy after the Pretoria High Court ruled that granting the SRD grant only to those who earn less than R625 per month is unconstitutional.

“With this judgment, we anticipate that an additional seven to 8-million South Africans may qualify for the SRD grant. This would amount to the need to allocate up to an additional R36bn to grant recipients,” Ngwenya and Govender said.

South Africa’scurrent foreign debt reliance would balance the national fiscus, with the debt set to rise to R6 trillion for the 2025/26 financial year. R382 billion of the budget goes towards settling the debt.

Ngwenya and Govender said it is likely South Africa would need to increase its borrowing to balance the national budget, with the dire state of many state-owned entities (SOEs) placing significant strain on the economy. They said as long as the SOEs continue to languish, it will hinder economic growth.

“Overall, SOEs have continued to seek government bailouts with Transnet most recently having been reported as seeking an additional bailout similar to that which had been structured for Eskom,” they said.

Picture: X/@Nhleiks5 

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Compiled by Matthew Petersen

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