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(Bloomberg) — Below are the highlights of South Africa’s third iteration of the 2025 budget announced by Finance Minister Enoch Godongwana in Cape Town on Wednesday, after two previous versions were withdrawn because of disagreements within the governing coalition over taxes.
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Taxes
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- The National Treasury plans to raise an additional 16.7 billion rand ($934 million) in the year through March 2026 by not adjusting personal income-tax brackets and rebates to take account of price growth.
- Fuel levies will be hiked in line with the inflation rate, while there will be an inflation-beating increase in excise duties on alcohol and tobacco products.
- Next year’s budget will propose measures to raise an additional 20 billion rand in taxes in 2026-27 if the South African Revenue Service is unable to raise additional income through more efficient administration and increased tax compliance. To assist in this endeavor, it will get an additional 4 billion rand over the next three years to supplement the 3.5 billion rand set aside in October. That will help strengthen capacity to bolster debt collection by 20 billion rand to 50 billion rand a year.
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Infrastructure Investment
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- Over the next three years, 1.03 trillion rand will be allocated to public infrastructure including roads, energy, water and sanitation. The budget adds 33.7 billion rand to infrastructure plans over the next three years, slightly lower than the 46.7 billion rand proposed in March.
- A single structure overseen by the Treasury to coordinate state participation in project preparation and planning, public-private partnership funding and credit guarantees will be set up by March 2026.
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Growth
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- Economic growth was revised lower and is seen averaging 1.6% over the next three years, compared with 1.8% in March because of a weaker global economic growth outlook, trade frictions, increased uncertainty and lower projected investment.
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Forecasts
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- The consolidated budget shortfall is forecast at 4.8% of gross domestic product for the current fiscal year, slightly higher than the 4.6% of GDP forecast in March and seen narrowing to 3.4% in 2027-28.
- Spending of 2.58 trillion rand is projected for 2025-26, marginally down from the 2.59 trillion rand forecast in March. Revenue collection is seen at 2.2 trillion rand.
- Preliminary data shows the Treasury achieved a primary budget surplus – where revenue exceeds non-interest spending – for a second year in a row of 0.7% of GDP in the year through March 2025 and expects it to widen to 0.8% of GDP in 2025-26, enabling debt to stabilize.
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Debt
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- Government debt is expected to stabilize at 77.4% of GDP in 2025-26 – a slightly higher level than 76.2% projected in March, mainly due to lower nominal GDP.
- The gross borrowing requirement is projected at 588 billion rand in 2025-26. That’s marginally higher than the 582 billion rand projected in March. It is seen falling to 434.3 billion rand in 2026-27 and then climbing to 587.7 billion rand in 2027-28.
- Domestic and foreign loan redemptions will increase from 171.7 billion rand this fiscal year to 301.3 billion rand in 2027-28. The bond-switch program will mitigate refinancing risks by spreading redemptions over time.
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Spending
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- Consolidated spending was revised down by 69.4 billion rand over the next three years. The budget cuts are concentrated in provisional allocations, which are revised to 141.8 billion rand from 204.8 billion rand. As a result, government spending is expected to grow at an average annual rate of 5.4% to 2.81 trillion in 2027-28 from 2.4 trillion rand in the year through March 2025.
- Allocations to the early retirement program for public servants, Passenger Rail Agency of South Africa and frontline services — including education, health, home affairs and defense – were revised down.
- Those to social grants aimed at mitigating the impact of the scrapped VAT hike proposal were shelved.
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Source: National Treasury
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—With assistance from Ntando Thukwana.
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English (US)