Budget's revenue-generating measures could affect citizens: DaVinci Institute
The DaVinci Institute has expressed concern that the budget's revenue-generating measures, especially a proposed fuel levy increase, could negatively affect ordinary citizens.
Finance minister Enoch Godongwana, in his budget speech on Wednesday, announced an increase in the fuel levy for the first time in three years, set to take effect on June 4. The levy will rise by 16c/ l for petrol, bringing it to R4.01/ l , and by 15c/ l for diesel, bringing it to R3.85/ l . The fuel levy increase is expected to generate about R3.5bn to R4bn in this financial year.
The business school said this will probably increase the cost of living, including food and transport.
'Yet, there is no clear mechanism to create sustainable jobs and grow the economy at the rate at which it could absorb most of the people of working age in South Africa.'
It said the National Treasury's revised budget featured some cuts and lower revenue predictions due to a reduced forecast for GDP growth. The r evised budget forecast an average annual spending growth of 5.4%, increasing from R2.4-trillion in 2024/2025 to R2.81-trillion in 2027/2028.
'This is a decrease from the previously proposed 5.6% growth in March, resulting in an estimated reduction of about R200bn over the medium-term three-year period.
The school said government's debt service costs consumed 22 cents of every R1 of revenue.
The National Treasury has reduced gross tax revenue projections by R61.9bn for the 2025 medium-term expenditure framework period, though the figures still exceed those from the 2024 medium-term budget policy statement.
'For South Africa to achieve its previous 5% GDP growth target and reduce unemployment, [there is] a need for increased foreign direct investment (FDI).
'An additional 15% of GDP in fixed investment is required to reach this growth goal. South Africa's fiscal and industrial policies must be designed to attract foreign investment. Without this the long-term economic outlook will remain constrained.'
The school said there was concern about a lack of accountability in governance, particularly at local government level, to ensure the budget led to tangible economic benefits. Poor governance and inefficiencies in state institutions remained a serious concern.
'More attention must be given to the unseen cost of governance failures in key state organs.'
It said preconditioned measures for accountability, transparency and spending oversight should be followed up and reported on effectively to prevent leakages in the system.
The budget speech laid out bold fiscal strategies but the true test lay in execution and alignment to the medium-term development plan 2024 — 2029.
'Sustainable economic growth, tax optimisation, increased FDI and accountable governance will be essential in shaping South Africa's financial future.'
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