Page 4 - 14 March 2025

PAGE 4 · THE REPORTER 14 MARCH 2025

A constructive development r e v i e w o f t h e s k i l l s Spending Increase of
would be the announcement development funding R40bn
of a spending review, which system, which is allocated • 0.75 pp increase in VAT:
could take approximately R22.7bn for the fiscal year R22bn
three to six months to 2024/25. • Bracket creep: R16bn
complete. Over the past In April 2019, President • Potential fuel levy
decade, National Treasury Ramaphosa received a increase: R4bn
has managed core non- report from the Department
interest spending to counter of Public Service and • Zero rating of food
products and bracket
R520bn in bailouts to state-
Key focus areas when GDP (approximately R34bn) departments. Administration regarding the relief for two lower
Finance Minister Enoch for the fiscal year 2024/25. Other Spending Initiatives: owned enterprises (SOEs). reconfiguration and rationa- income groups
Godongwana delivers his The anticipated multiplier Another 21.6% is directed This has resulted in a lisation of administrative Pension Contribution
2025 Budget Speech will effect of the proposed towards various spending stabilisation or decline in real processes, which remains Holiday
include: budget is low, suggesting i n i t i a t i v e s , i n c l u d i n g spending per person since relevant in the context of
2016, highlighting the need
• The increase in net new that the economic benefits employment programmes, to increase funding for front- these ongoing discussions. A government contribution
holiday for the GEPF
s p e n d i n g a n d i t s of the increased spending the South African National line services. However, it is Measures to raise additional amounting to R53bn, which
composition. may not be sufficient to Roads Agency Limited critical to professionalise revenues could be combined with a
stimulate significant growth. (SANRAL), debt repayment, In the short term, several
• Proposed tax increases to This raises concerns about SANDF troop deployment in and enhance the efficiency spending review.
fund this new spending. of government spending. scenarios for tax increases
the effectiveness of the the Democratic Republic of are proposed based on the Corporate Income Tax and
• Implications for econo- b u d g e t m e a s u r e s i n the Congo (DRC), local The October 2024 MTBPS net increase in spending. Wealth Tax
mic growth. fostering a robust economic government elections, and indicated that spending Given that a 2 ppt VAT An increase in corporate
environment and the need direct charges. reviews would be conducted
This framework will be on the social grant system increase is unlikely to be income tax and wealth tax is
critical for assessing the for more tax increases in Infrastructure Investment: and skills levy, with results enacted, a combination of considered highly unlikely.
potential impact on fiscal coming years if the The remaining 26.9% is expected to be presented in tax increases appears more A d d i t i o n a l l y, S A R S
policy and overall economic p r o p o s e d s p e n d i n g earmarked for infrastructure the 2025 Budget; however, probable: Commissioner Kieswetter
performance. trajectory is extended. investment, which includes this has not yet occurred. Spending Increase of has indicated that enhancing
The redistributive impact of R19.2bn allocated to the R25bn
The February 2025 Budget The MTBPS noted the tax capacity could lead to
was rejected due to a the proposed VAT increase, Passenger Rail Agency of extensive financial support • VAT remains unchanged increased tax collections.
South Africa (Prasa) and
alongside the zero-rating of
proposed 2 percentage provided to unemployed at 15% The International Monetary
point increase in VAT aimed additional foodstuffs and R11.8bn for the Budget individuals, which is • Bracket creep: R16bn Fund (IMF) has suggested
at financing an increase in adjustments to tax brackets Facility for Infrastructure disbursed by various • Fuel levy: R4bn that comprehensive tax
non-interest spending. This for lower-income earners, is Window 8 projects. agencies that do not operate • Medical aid tax credit: administration reforms
expected to negatively affect
proposal was unexpected, as middle- and high-income Addressing the fiscal as a cohesive, integrated R2bn could raise revenue by 3
the October 2025 MTBPS challenge is fundamentally a system. There is currently no • Customs duties: R3bn percentage points of GDP
did not indicate any such taxpayers, who are already political decision, and recent linkage between the social • pending Increase of over six years. Moreover, the
intention. National Treasury subject to high tax burdens. media reports indicate that security system and the R30bn digitisation of revenue
estimates that a 2 ppt VAT National Treasury's 2025 the GNU has yet to reach an policy goal of increasing • 0.5 ppt increase in VAT: administrations could boost
increase could generate GDP growth forecast has agreement on the fiscal e m p l o y m e n t . T h e R15bn tax collection by nearly 1 ppt
R60.0bn, R63.7 bn and been revised to only 0.2 ppt framework. Additionally, government is exploring • Bracket creep: R16bn of GDP. However, these
R67.3 bn over the next three higher at 1.9% (compared to reports from the weekend reforms to the grant system • Zero rating of food measures are viewed as
years, totaling R191bn. This the previous forecast in highlighted that the Minister and aims to consolidate products and bracket medium-term objectives
revenue is intended to October 2025), with of Finance has linked the p u b l i c e m p l o y m e n t relief for two lower rather than immediate
finance a net increase in new consumption spending proposed 2 ppt VAT increase initiatives. This will include a income groups solutions.
spending of R173 bn during projected to grow from 1.8% to the financing of a
the same period. to 1.9%. However, the permanent social grant.
downward revision of GDP This social grant has been
Given South Africa's growth by 0.6% for 2025,
elevated debt levels, from an earlier estimate of implemented annually since
currently at 76% of GDP, and 0.7% in 2026, has led us to its introduction during the
debt servicing costs adjust our own 2025 COVID-19 pandemic in
consuming 21.1% of gross forecast downwards to 1.6%, 2020, and an unallocated
tax revenues, it is evident with associated downside reserve has been set aside
that the National Treasury is risks. each year within the Medium
focused on stabilising debt Term Expenditure Frame-
by maintaining a primary The proposed increase in work (MTEF) period to
budget surplus throughout current spending is support this initiative. The
t h e M e d i u m - T e r m primarily focused on the ongoing discussions and
Expenditure Framework following areas: decisions surrounding the
(MTEF). An increase in Enhancing Compensation fiscal framework will be
s p e n d i n g w i t h o u t a and Hiring: A significant crucial in determining the
corresponding rise in portion (21.6%) is allocated sustainability and effective-
revenues would jeopardise to improving compensation ness of such social support
the estimated primary and hiring additional per- measures.
budget surplus of 0.5% of s o n n e l i n f r o n t - l i n e Spending review