R466bn ‘hit' as National Treasury lowers SA GDP forecast
'This is the main contributor to the projected increase in the country's debt-to-GDP ratio' – DG Duncan Pieterse.
South Africa's National Treasury has lowered its GDP growth forecast for the country (to 1.4%) for 2025, as well as for the next two years (1.6% in 2026 and 1.8% in 2027), in the wake of 'international trade volatility and policy uncertainty' due to US President Donald Trump's tariffs and the resultant threat of a global trade war.
The slower growth over the next three years is expected to have a R466 billion 'hit' on the SA economy, Director-General (DG) of the Treasury Duncan Pieterse confirmed in response to questions during a Budget 3.0 media Q&A session on Wednesday.
In the March budget, Treasury forecast 1.9% GDP growth for 2025, 1.7% for 2026, and 1.9% for 2027. However, it had to revise this downwards in the latest budget.
Facing questions about SA's 'weaker fiscal position' reflected in the country's higher debt-to-GDP forecast of 77.4% in Budget 3.0 (up from 76.2% in the March budget), Pieterse said the downward revision in economic growth 'is what's driving' the increase in debt-to-GDP projections over the next three years, not higher government debt levels or significant increases in spending.
ALSO READ: Sensible or underwhelming? Economists react to Godongwana's Budget 3.0
He said that due to the revision of the economic outlook, SA is now forecast to see 'a R130 billion movement' in nominal GDP growth for 2025 – essentially less-than-expected growth.
'In 2026/27, the impact would be around R161 billion, and in 2027/28, around R178 billion … The cumulative effect [of the lower GDP growth] is some R466 billion,' Pieterse later added.
'Included in this is the fact that we ended up with lower-than-expected GDP growth in the last quarter of 2024 [0.6%, instead of the forecast 0.8%]. Remember that the Q4 2024 GDP outcome was not included in the March budget [it was not released at the time],' he explained.
Source: National Treasury
Pieterse said the lower GDP growth forecast effectively 'pushed up the debt-to-GDP' or debt as a percentage of GDP metric.
'However, for us, the de facto fiscal anchor is the primary surplus … And that is getting better. We believe our fiscal objectives are on track,' he said, echoing Finance Minister Enoch Godongwana.
ALSO READ: Budget 3.0 was not a chainsaw budget, economists say
Pieterse stressed that more focus should be placed on SA's primary surplus and the fact that the forecast budget deficit as a percentage of GDP was still 'intact' at 4.6% for 2025/26.
'As global growth has faltered, South Africa's economic outlook has also weakened, with GDP expected to grow by only 1.4% in 2025. Global risk and economic weakness reinforce the need for us to put our fiscal house in order,' he said in the foreword of the latest Budget Review, tabled with other budget documents in parliament on Wednesday.
'The fiscal strategy remains on course so that government can spend less on debt-service costs and more on critical public services. As per our commitment, government debt will stabilise in 2025/26 at 77.4% of GDP. For the first time since the 2000s, government is consistently running a primary surplus, where revenue exceeds non-interest expenditure,' Pieterse added.
This article was republished from Moneyweb. Read the original here.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Daily Maverick
4 hours ago
- Daily Maverick
Stocks rise, dollar tentative ahead of US-China talks outcome
Investors hold nerve ahead of details from U.S.-China talks Stocks gain, dollar pares some losses JGB yields fall from record highs By Rae Wee and Johann M Cherian SINGAPORE, June 10 (Reuters) – Stocks were buoyant and the dollar remained on guard on Tuesday as trade talks between the United States and China were set to extend to a second day, with tentative signs tensions between the world's two largest economies could be easing. US President Donald Trump put a positive spin on the talks at Lancaster House in London, which wrapped up for the night on Monday and were set to resume at 0900 GMT on Tuesday. 'The fact that we're still up here near record highs, does suggest that we are seeing the market accept what has been said by Trump and when you look at some of the other comments from Lutnick and Bessent, to me it seems to suggest that they are relatively happy with the progress,' said Tony Sycamore, a market analyst at IG. 'But the market always likes to see some concrete announcements.' As Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer were set to meet for the second day with their Chinese counterparts, much of investors' focus has been on the progress of the talks. Any progress in the negotiations is likely to provide relief to markets given Trump's chaotic tariffs and swings in Sino-U.S. trade ties have undermined the world's two biggest economies and hobbled global growth. Stocks advanced in Asia, extending their rise from the start of the week. MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.5%, while Nasdaq futures gained 0.62%. S&P 500 futures edged 0.43% higher. EUROSTOXX 50 futures and FTSE futures both added roughly 0.1% each. In Tokyo, attention was also on the Japanese government bond (JGB) market, following news that Japan is considering buying back some super-long government bonds issued in the past at low interest rates. The yield on the 10-year JGB fell one basis point to 1.46% in early trade, while the 30-year yield slid 5 bps to 2.86%. Yields on super-long JGBs rose to levels last month due to dwindling demand from traditional buyers such as life insurers, and jitters over steadily rising debt levels globally. 'The volatility at the super-long segment of the curve stems from a supply-demand imbalance that has been brewing since the BOJ embarked on balance sheet normalisation,' said Justin Heng, APAC rates strategist at HSBC Global Investment Research. Japanese Finance Minister Katsunobu Kato said on Tuesday the government will conduct appropriate debt management policies while communicating closely with market participants. In currencies, the dollar attempted to regain its footing after falling on Monday. Against the yen, the dollar was up 0.45% to 145.25. The euro fell 0.28% to $1.1387 while sterling slipped 0.2% to $1.3523. Trump's erratic trade policies and worries over Washington's growing debt pile have dented investor confidence in US assets, in turn undermining the dollar, which has already fallen more than 8% for the year. The next test for the greenback will be on Wednesday, when US inflation data comes due. Expectations are for core consumer prices to have picked up slightly in May, which could push back against bets of imminent Federal Reserve rate cuts. The producer price index (PPI) report will be released a day later. 'May's US CPI and PPI data will be scrutinised for signs of lingering inflationary pressures,' said Convera's FX and macro strategist Kevin Ford. 'If core CPI remains elevated, expectations for rate cuts could be pushed beyond the June 18 FOMC meeting.' Traders see the Fed keeping rates on hold at its policy meeting next week, but have priced in roughly 44 bps worth of easing by December. In the oil market, prices edged up, with Brent crude futures gaining 0.24% to $67.20 a barrel. US West Texas Intermediate crude was last up 0.25% at $65.45 per barrel after hitting a more than two-month high earlier in the session.
Daily Maverick
10 hours ago
- Daily Maverick
Small business, big problems — SA's entrepreneurs still face uphill battle
In post-pandemic South Africa, the phrase 'small business is the backbone of the economy' has become something of a national mantra. Small and medium enterprises account for more than 60% of jobs and roughly 40% of GDP, according to estimates from Stats SA and the Treasury, yet continue to face regulatory bottlenecks, financial exclusion and bureaucratic roadblocks that larger corporates are typically better equipped to manage. Business Maverick's latest webinar, 'Small Business, Big Problems: What Government Could Be Doing', brought together Business Maverick's editor, Neesa Moodley, Sourcefin CEO Joshua Kadish and Regent Business School's academic dean, Dr Shahiem Patel, for a candid conversation on why South Africa's entrepreneurs still face an uphill battle — and what could actually unlock progress. Forget the pitch deck: start anyway 'There's a shift,' said Patel, referring to the changes in the small-to-medium business environment in South Africa. 'You don't really need capital to launch a business. You need finance to scale a business.' This mindset shift — from funding as a prerequisite to funding as a growth tool — was echoed throughout the session. Entrepreneurs today launch Instagram stores and TikTok businesses in under an hour. What they need, increasingly, is not startup capital, but scale capital, according to Patel. Kadish agreed: 'Traditional banks in South Africa base credit decisions on past performance, collateral and tax compliance. But early-stage SMEs [small and medium enterprises] don't tick those boxes. What they need is forward-looking credit.' The irony? The very regulations designed to protect consumers are choking the businesses meant to employ them. 'It's not just red tape,' noted Moodley. 'It's the weight of compliance — especially when you're a one-person startup juggling five roles.' Death by paperwork Kadish outlined an inhibiting bureaucracy where something as basic as opening a bank account requires repeated Fica (Financial Intelligence Centre Act) submissions, even across the same financial group, causing needless hurdles for small businesses looking to enter the market. 'There's no central repository,' he noted of the process required for the verification of a business and the personal documentation required for everything from opening a bank account to lines of credit. 'You Fica yourself 14 times for 14 institutions. And even then, it takes a week to open a transactional account.' And compliance hurdles don't end there. New policies — like the Ultimate Beneficial Ownership filing regimen — threaten deregistration for startups unaware of such technicalities. Tax complexity, uncertainty about the Protection of Personal Information Act, and ambiguous VAT obligations compound the confusion. 'We need to stop seeing regulation as an inhibitor,' said Patel. 'It can be an enabler — if implemented accessibly.' Both speakers emphasised the need for a single digital compliance portal — a centralised, Application Programming Interface-enabled interface for the SA Revenue Service; Companies and Intellectual Property Commission; Compensation for Occupational Injuries and Diseases Act; Unemployment Insurance Fund, and others. The technology, they insisted, already exists. What's missing is the political will — and a user manual. A hurdle for the informal sector When asked about support for the informal sector, where millions of rands move in daily trade without tax filings, documentation, or even bank accounts, Kadish was blunt. 'Without documentation, you're confined to the informal sector,' said Kadish. 'You'll never really graduate.' The post-Covid boom in contactless payments (via tools like Yoco or SnapScan) offers new data trails — but even these haven't brought the informal economy fully into the funding fold. 'Financial institutions have long treated informal trade as no-go zones,' explained Kadish. 'That's slowly changing. But we need tailored products, not copy-paste corporate credit models.' Patel added that policy incentives, like VAT breaks or employment-linked tax deferrals, could catalyse formalisation without suffocating early-stage ventures. Red tape and repayment Public procurement — a potential growth engine for SMEs — has its own catch-22. 'To do business with the government, you often need a performance guarantee. But no one wants to issue those to small businesses,' explained Kadish. 'It's the same cycle: no track record, no credit; no credit, no growth.' 'The education gap is real,' said Patel. 'So is the mentorship gap. We need layered support — formal, informal, and from peers.' Lessons from Singapore In his closing remarks, Kadish offered a bold suggestion: learn from Singapore, long held as a symbol of fostering economic development, particularly small businesses and services in the financial sector. 'Early-stage startups there pay no tax on their first $250,000 in income,' he said. 'Investors also pay no capital gains tax, provided they invest early. And the government will match private investment rand-for-rand.' Rather than handing out grants with minimal repayment pressure — often abused and never recovered — Kadish proposed co-investment models, tax incentives and tighter public-private partnerships that reward both performance and transparency. South Africa's current grant schemes, by contrast, often suffer from weak repayment enforcement, limited milestone tracking and low auditability. 'Let the government earn upside too,' he argued. 'Let's get creative with how we fund risk.' Shepherding from incubators to ecosystems Patel warned against romanticising incubators or JSE boardroom mentorships as panaceas to the real challenges that those starting businesses really face. 'Executives aren't entrepreneurs,' noted Patel. 'They have different skill sets — and while their advice can be valuable, it's not always informed by the daily triage of early-stage entrepreneurship.' He highlighted initiatives at Regent Business School like the RED (Regent Enterprise Development) Hub, where students blend theory, practice and entrepreneurship into job-making ventures. Projects like biowaste-to-energy converters and automated irrigation rigs are already showing promise. The real ask of regulation: enabling, not overreach If there was one message from both speakers, it was this: the government must enable, not entangle. Patel put it plainly: 'We need electricity. Roads. Data access that's not the most expensive in the world. Regulation that protects, not paralyses.' Kadish agreed, offering a crucial perspective on the importance of basic infrastructure in enabling an environment that facilitates business development, contrasting South Africa with a country in a much more challenging situation. 'Even in Ukraine, under bombardment, the trains run. The lights stay on. Here, it often feels like war just trying to keep your bakery open,' he said. 'We talk about SMEs being critical,' concluded Moodley. 'But until support becomes accessible at scale, it's just talk.' For a country that claims SMEs are the future, South Africa has a long way to go in making that future viable. DM
Daily Maverick
10 hours ago
- Daily Maverick
‘Real people drawing fraudulent salaries' — crackdown looms on public sector ghost employees
It's time to end this 'orchestrated form of systemic corruption' draining state resources, says the chairperson of Parliament's Portfolio Committee on Public Service and Administration. Parliament's Portfolio Committee on Public Service and Administration says public sector workers should report in person to prove they're not ghost employees. 'A data audit alone is not enough. We are calling on this process to begin with physical in-person human verification audits for all government employees underpinned by biometric identification. Every person drawing a public salary must appear in person and be verified,' said committee chairperson Jan de Villiers (Democratic Alliance) in a governance cluster press conference in Parliament on Monday. 'The public has the right to know the names on the payroll correspond to individuals who really exist and who serve the public.' Read more: Ghost employees who haunt payrolls are a major occupational fraud hazard Finance Minister Enoch Godongwana, in his Budget tabled last month, announced sweeping expenditure reviews of more than R300-billion in government spending since 2013, 'with the aim of identifying duplications, waste and inefficiencies'. Godongwana said the data-driven initiative would cross-reference administrative datasets to 'identify ghost workers and other anomalies across government departments'. De Villiers said the portfolio committee, following Godongwana's announcement in his Budget, had convened on 28 May to interrogate the 'persistent and deeply corrosive problem' of ghost workers in the public sector. He said the National Treasury could not tackle this challenge alone — it required a joint, coordinated strategy, which was now under way between the Treasury and the Department of Public Service and Administration (DPSA). 'We will reconvene with the Department of Public Service and Administration and the National Treasury in the third quarter of 2025 to receive a full progress report on the implementation of the joint ghost worker audit strategy. This should include details on the scope of these audits, preliminary findings and proposed enforcement measures,' said De Villiers. 'Orchestrated form of systemic corruption' Ghost employee fraud is among South Africa's most persistent public sector challenges. However, the total number of ghost workers — individuals who are fraudulently added to an organisation's payroll but do not actually work there — is unclear. In 2021, the government launched Project Ziveze to investigate and verify all Passenger Rail Agency of South Africa (Prasa) employees after material irregularities were uncovered within Prasa's ICT and payroll systems, indicating that there could be about 3,000 phantom workers. A preliminary report in November 2022 revealed that 1,480 employees could not be verified, while 1,000 others had resigned, Daily Maverick's Suné Payne reported. The agency is estimated to have saved about R200-million through the verification project. Last year, the Auditor-General of South Africa uncovered R6.4-million being paid to 'deceased and terminated' employees. The Public Servants Association (PSA) described this as a 'shocking misuse of public funds' and a 'gross violation of financial accountability'. And in May 2025, the Sunday Times reported that the Gauteng Department of Health had frozen the salaries of 230 employees who could not be verified. These are a handful of the reported cases of ghost employees. 'These are not invisible names on paper. Real people are drawing fraudulent salaries, and fraudulent money is being siphoned into the pockets of corrupt criminals,' said De Villiers. He said the department had disclosed that inserting a ghost employee into the payroll system 'requires collusion because at least three officials need to work together to create a ghost worker. This means that we are dealing not with random lapses in judgment, but with embedded criminal syndicates operating in our public institutions.' He added that the issue of ghost workers was 'not merely a payroll anomaly. It is a deliberate and orchestrated form of systemic corruption. It is organised crime within the state. And as a portfolio committee, tasked with oversight in the public service, the time for half-measures and talk shops is over. 'Let us be clear, the phenomenon of ghost workers is not an issue of administrative error. There are real people creating these ghost workers, reaping the benefits of siphoning taxpayer money into their coffers. 'Every ghost worker represents a post that could've been filled by a qualified graduate, a dedicated nurse, a teacher at a rural school or a social worker supporting the vulnerable. Every fraudulent salary paid is a step backwards in the fight for a professional, ethical and responsive state.' Widespread phenomenon De Villiers did not know how many ghost workers there were in the public service, but suggested, when looking at the known instances of ghost employees, 'that there are thousands'. He said the DPSA had confirmed before Parliament that ghost workers were present across all three spheres of government, including national, provincial and local governments, as well as government agencies and state-owned enterprises. 'The reality is every single department, state agency, level of government and state-owned enterprise that we have, probably has ghost workers on their payroll.' PSA spokesperson Reuben Maleka told Daily Maverick on Monday that the organisation supported a physical audit of ghost workers who 'rob' the public sector of its capacity to provide services to the public. 'The problem is widespread throughout the public sector — government departments, municipalities [and] government entities. The cleaning must happen across the sector,' said Maleka. In addition to calling for a physical audit, De Villiers said the committee would 'push for disciplinary and criminal action to follow every detection of ghost workers. 'We don't know how many ghost workers there are, we don't know who's involved, and not enough people have been arrested so far, to be quite frank. 'I am not aware, as committee chairperson, of a single person who has been arrested thus far in terms of the creation of ghost workers,' he said. De Villiers added that South Africa's ghost worker phenomenon was not only made possible by fraud, but by 'outdated and fragmented administrative processes and systems'. Daily Maverick contacted the National Treasury and the DPSA with queries. Comment will be added once received. DM
