The Minister of Finance, Enoch Godongwana, will deliver the 2025 Budget Speech on Wednesday (19 February 2025).
During the Budget Speech, the finance minister indicates the allocation of financial resources to the national government’s priorities outlined by President Cyril Ramaphosa in the State of the Nation Address.
Godongwana will outline all the financial, economic, and social commitments the government will prioritise in its planned expenditure. He will provide a detailed plan for 2025 spending, including proposals for revenue collection to help fund the government’s planned interventions and commitments.
Ania Strydom, compliance research manager at PaySpace, outlines what to expect.
South Africa has stumbled significantly in the past. Yet, 2024 was a year of progress. Persistent power cuts have largely subsided, though not disappeared. South Africa was one of more than 60 countries to conduct national elections, almost uniquely resulting in a mature and collaborative compromise called the Government of National Unity (GNU), which has thus far created more stability and progress.
Looking ahead, GDP growth is anticipated to average 1,8% from 2025 to 2027, indicating a gradual recovery reflected by cautiously optimistic attitudes among investors. Yet, many challenges remain, such as massive unemployment, cost of living issues, household and national debt, pressure on social security, lower tax revenue, and international uncertainty.
The National Treasury has stuck to its careful and systematic approach, adjusting its 2024 economic growth forecast to 1,1%, down from the 1,3% projected earlier. Can the National Budget keep pulling the reins on spending while reducing pressure on citizens, creating a stable base for future growth?
It’s become a regular mantra to say that Finance Minister Enoch Godongwana and the National Treasury have a tightrope to walk. However, that statement has never been more relevant than in 2025.
As we approach the 2025 Budget Speech, several key areas warrant attention. What are predictions for the new budget?
- Corporate Income Tax: South Africa has enacted the 15% global minimum corporate tax, aligning with the OECD’s efforts to curb profit shifting. This is expected to boost the corporate tax base by R8-billion by 2026/2027. The 2025 Budget will likely focus on enforcing and administering this tax. While a reduction in the corporate tax rate is unlikely, the government may refine exemptions, allowances, and incentives within the broader corporate tax framework.
- Personal Income Tax: Despite calls on the previous budget to adjust personal income tax brackets that reflect inflation and reduce the burdens of “tax creep”, ongoing fiscal pressures make it more likely that the government will not adjust these brackets.
- Value-Added Tax: VAT is the most universal South African tax and is thus very politically sensitive. It took considerable pressure for the government to raise this tax to 15% in 2018, and even the current fiscal pressures are unlikely to motivate a raise in VAT. Instead, there is momentum to zero-rate more basic items and alleviate the burden on vulnerable populations.
- Fuel Levies: The general fuel levy has been unchanged for the past three years. Given the current economic climate and the need to balance revenue generation with consumer impact, it is plausible that the government will opt to keep the fuel levy steady once again, providing some relief to consumers amidst fluctuating fuel prices.
- Medical Tax Credits and National Health Insurance: With ongoing discussions around the implementation of the NHI, there is speculation that medical tax credits may be targeted to redirect funding towards the NHI. In the 2025 Budget, we might see initial steps in this direction, potentially through a cap or reduction in the current medical tax credits.
- Social Security and Grant Reforms: With as much as 30,6% of the population expected to receive some form of social grant over the next three years, social protection is a hot-button topic for many South Africans. The government could consolidate public employment programmes and reform the grant system to improve efficiency and alignment with employment initiatives.
- Wealth Tax: Implementing a wealth tax could enhance revenue collection and address income inequality; thus, the introduction of a wealth tax on high-net-worth individuals may be considered.
- Employment Tax Incentive: Aligning ETI thresholds with the new minimum wage would encourage employers to hire more young workers. The ETI thresholds may be adjusted in line with the national minimum wage increase to R28.79 per hour effective March 2025.
- Alcohol Levy: The Minister could introduce a levy on alcohol sales to fund the Road Accident Fund, addressing the link between alcohol consumption and road accidents.
The South African Government has indicated it wants to emphasise growth and attract investment while increasing support for our most vulnerable citizens. We can likely expect a prudent and conservative budget with few surprises.
However, there is room for some more radical shifts, and as always, it will be interesting to see how the Budget Speech helps South Africa rise.