logo
South Africa: Budget 3.0, the GNU's strategic pivot that's balancing growth with fiscal responsibility

South Africa: Budget 3.0, the GNU's strategic pivot that's balancing growth with fiscal responsibility

Zawya22-05-2025

Without a doubt, when the Government of National Unity (GNU) drew up the 2025/26 Budget, various compromises and trade-offs were both inevitable and necessary to achieve a workable balancing of the books.
This was especially true when it came to meeting the needs of poor households, who had initially been promised an expansion of the zero-rated basket—a list of essential items not subject to VAT, such as basic foodstuffs—to shield them from the impact of a VAT increase. However, the government later scrapped the plan after U-turning on its decision to implement a VAT hike on 12 March 2025.
'The proposed increase to Value Added Tax (VAT) created so much debate—a vital debate, no doubt, but one that also created some uncertainty given the difficult trade-offs needed to balance fiscal sustainability while addressing our developmental goals,' Finance Minister, Enoch Godongwana said.
He was speaking on Wednesday, 21 May 2025 during his third attempt to deliver the national budget. His two prior efforts were derailed by disagreements within the Government of National Unity (GNU) over proposed tax increases.
He laid the issue to bed once and for all: VAT remains unchanged at 15%.
However, amid political and legal challenges, and in spite of government facing limits on its funding options as a result, the 2025/26 Budget has made a strong comeback, designed to support economic activity and boost future growth prospects.
Its focus? A redistributive framework, which sees 61% of non-interest government spending allocated to the social wage, that will fund essential services, grants and critical infrastructure. To this end, government has invested over R1tn in infrastructure to boost economic prospects and expand access to basic services.
"This, all the while promoting fiscal sustainability, so future generations are not burdened by the decisions we make today," Godongwana added.
Smart fiscal strategy
Meanwhile, North-West University Business School economist, Raymond Parsons praised the overarching framework, saying: 'If fully implemented, the strong emphasis on infrastructural development bodes well for the 3% GDP growth in the medium term envisaged by the Government of National Unity (GNU).'
He added that, 'The latest Budget has therefore provided a combined policy and project foundation on which to build SA's fiscal sustainability over the longer term.'
To strike the necessary fiscal balance, Godongwana outlined a three-pronged approach that includes reprioritising spending, enhancing efficiency, and increasing revenue. The measures include:
Reducing additional spending over the medium term by R68bn —by releasing funds that had been set aside as provisional allocations for possible future use, but which had not yet been formally committed to specific government departments or programmes.
"Simply put, this means baseline allocations across all spheres of government remain largely unchanged. Instead, the size of the proposed increases to allocations is reduced, in line with what we can afford," Godongwana said.
Increasing revenue. To protect and bolster frontline services, while expanding infrastructure investments to drive economic activity, government has proposed an inflation-linked increase to the general fuel levy - the only new tax proposal for the 2025/26 fiscal year - and the first fuel-levy increase in three years.
As a result from Wednesday, 4 June this year, the general fuel levy will increase by 16 cents per litre for petrol, and by 15 cents per litre for diesel.
To further close the fiscal gap over the medium term, the 2026 Budget also allocated an additional R7.5bn over the Medium-Term Expenditure Framework, to increase the effectiveness of the South African Revenue Service (Sars) in collecting more revenue. Part of this allocation will be used to raise R20bn, which will cover debts owed to the fiscus.
Parsons highlighted the importance of participation by both the State and private sector in advancing economic reform and public infrastructure delivery.
'Both the role of Operation Vulindlela and the participation of private-sector investment remain indispensable to successful delivery of key infrastructural outcomes, especially in transport, logistics, energy and water,' he said.
Improving efficiency. The National Treasury reviewed over R300bn in spending since 2013, identifying R37.5bn in potential savings. To this end, underperforming programmes will be closed, and reforms will enhance infrastructure planning and payroll oversight. A data-driven system will replace costly censuses and reduce regulatory burdens on businesses.
Growth, Stability, Hope
Parsons described the 2025/26 Budget as a pivotal political milestone: 'The good news is that this is now a GNU Budget, which is not only a plus for political stability, but should also ensure its subsequent passage through the various Parliamentary processes.'
He cautioned, however, that growth assumptions may be optimistic: 'While the original assumption of 1.9% GDP growth this year has been reduced to 1.4%, this recognises the new global and domestic economic realities shaping SA's growth prospects.
'The more conservative Treasury projection simply confirms why the third budget needed to be strongly growth-dominated. If SA wants to grow its tax base to enlarge its fiscal space, it needs a rapidly expanding economy in which job creation accelerates.'
Gondongwana followed on from this, saying the Budget is structured in a way to deliver on the hope for a better life and a better future for South Africans.
"It is an attempt to meet our shared goals of redistribution, redress and structural transformation," he said.
"We are not there yet. But I believe there is consensus in this House and around the country that this is the destination we need to strive for."

Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

South Africa: Government Must Provide Printing Services for Department of Basic Education (DBE), Not Private Companies, Committee on Education Chair
South Africa: Government Must Provide Printing Services for Department of Basic Education (DBE), Not Private Companies, Committee on Education Chair

Zawya

time2 hours ago

  • Zawya

South Africa: Government Must Provide Printing Services for Department of Basic Education (DBE), Not Private Companies, Committee on Education Chair

The Chairperson of the Select Committee on Education, Sciences and the Creative Industries, Mr Makhi Feni, has called on the Department of Basic Education (DBE) to seriously review the work it outsources to private providers and ballooned costs. The committee was briefed by the DBE and the North West Education Department on printing examination papers and school-based assessment tasks. The North West Education Department briefed the committee on the R500 million five-year contract awarded to a private company for printing matric exam question papers. Mr Feni said outsourcing government work to private companies has a potential to send a negative message that government lacked confidence on the ability of its employees to do the work. 'There is nothing wrong with outsourcing those kinds of work that government lacks the technical ability nor skills, but outsourcing to private companies should be necessary and there ought to be plans for transfer of skills,' said Mr Feni. He continued: 'We must always take into cognisance the serious infrastructure backlog that provinces like the NW are confronted with. How does one balance the two; the infrastructure backlogs and the expenditure on this private company for printing?' Mr Feni said he was not sure if the Department even had the kind of money which was likely to increase as it approached the end of the contract. 'We will not tire in making the call to enhancement internal capacity within departments. If we continue along this line, are we doing away with the functions of the state,'' asked Mr Feni. He called for enhancement of the existing capacity and to outsource work that that really need specialties. Printing related costs in the North West province has been in the news for the contract which seemed to have ballooned. Mr Feni sought clarity on whether back up systems were in place in case the private company was unable to deliver. 'The country could not be run through private hands; we want government to deliver the kinds of services it has the capacity to deliver. Private hands will not match what government delivers to its citizens as their preoccupation is profit maximization.' Mr Feni called on the North West Education Department to do more in ensuring that government delivered efficient services to the people. Distributed by APO Group on behalf of Republic of South Africa: The Parliament.

Basketball Africa League Announces Roster of Partners for Playoffs and Finals Underway Now in South Africa
Basketball Africa League Announces Roster of Partners for Playoffs and Finals Underway Now in South Africa

Zawya

time3 hours ago

  • Zawya

Basketball Africa League Announces Roster of Partners for Playoffs and Finals Underway Now in South Africa

Energade, Hyundai and Uber Join BAL's Existing Partner Roster that Features Rwanda Development Board, NIKE, Jordan Brand, Wilson, Afreximbank, Castle Lite, Hennessy, RwandAir and ServiceNow. Semifinals Tomorrow Will Feature Al Ahli Tripoli (Libya) vs. APR (Rwanda) at 4:00 p.m. CAT and Al Ittihad (Egypt) vs. Petro de Luanda (Angola) at 7:00 p.m. CAT. The Basketball Africa League (BAL) ( today announced the league's roster of marketing and merchandising partners for the 2025 BAL Playoffs that are underway now at the SunBet Arena in Pretoria, South Africa, and will culminate with the 2025 BAL Finals on Saturday, June 14 at 4:00 p.m. CAT. The new partners – Energade, Hyundai and Uber – are engaging fans in South Africa throughout the Playoffs and Finals and join the BAL's existing partner roster that features Foundational Partners Rwanda Development Board, NIKE, Jordan Brand and Wilson, as well as marketing partners Afreximbank, Castle Lite, Hennessy, RwandAir and ServiceNow. The 2025 BAL Playoffs, which are being held in South Africa for the first time, have featured the top eight teams ( from the three conference group phases that were held in Rabat, Morocco; Dakar, Senegal; and Kigali, Rwanda in April and May. The semifinals ( will take place tomorrow, Wednesday, June 11 when Al Ahli Tripoli (Libya) takes on APR (Rwanda) at 4:00 p.m. CAT and Al Ittihad (Egypt) plays Petro de Luanda (Angola) at 7:00 p.m. CAT. Tickets are on sale now at and Below are highlights of the partner activations throughout the BAL Playoffs and Finals: Energade As the Official Sports Drink Partner of the BAL Finals, Energade is hosting fan engagement activities in the BAL Fan Zone outside of the SunBet Arena where fans can stay active and hydrated. Hyundai As an Associate Partner of the BAL Playoffs and Finals, Hyundai is featured prominently with vehicle displays in the BAL Fan Zone and at the arena entrance. Fans engaging with the brand have the opportunity to win Hyundai and BAL merchandise and prizes. Uber Through the BAL's collaboration with Uber Eats, fans can conveniently order food from in-arena vendors right from their seats, with pickup available at a dedicated area on the concourse. Uber renamed the arena drop-off location in the Uber Rides App to 'SunBet Arena – Home of the BAL Finals.' The App also features BAL promotions offering fans discounted tickets to the Playoffs and Finals. Afreximbank As an Official Partner of the BAL, Afreximbank is supporting the off-court development of BAL players through BAL Advance, providing targeted training in areas such as nutrition, mental health, and financial literacy. Afreximbank is helping promote African creative talent by supporting emerging designers and showcasing their work through industry networking events organized by the league and at merchandise stands in the BAL Fan Zone. Castle Lite Castle Lite, the Official Beer Partner of the BAL, is engaging fans through a range of on-court and in-arena experiences. Hennessy Hennessy, the Official Spirit of the BAL, is engaging fans with a premium courtside experience at The Hennessy Lounge. The Hennessy Lounge is also hosting the brand's guests, including celebrities and influencers. NIKE Three-time WNBA MVP A'ja Wilson is gifting gift pairs of her newly launched NIKE A'One sneakers to the girls participating in the BAL4Her U-23 camp that is being held in conjunction with the Playoffs and Finals, marking the first time her shoes are being distributed in Africa. The camp is taking place from June 9-14, with former WNBA player Edniesha Curry returning as camp director for the second consecutive year. Distributed by APO Group on behalf of Basketball Africa League (BAL).

South Africa: Mr Price Foundation launches $169mln fund for young entrepreneurs
South Africa: Mr Price Foundation launches $169mln fund for young entrepreneurs

Zawya

time4 hours ago

  • Zawya

South Africa: Mr Price Foundation launches $169mln fund for young entrepreneurs

Mr Price Foundation has launched the Bindzu Youth Fund, a national initiative offering youth-owned businesses the chance to access a share of R3m in grant funding, along with coaching and growth support. Applications for the programme are now open. The fund aims to help young entrepreneurs scale their businesses through a combination of financial support, capacity development, and mentorship. Targeted support and funding - Tailored business development support - Technical assistance - Online and in-person bootcamp training - Expert mentorship and coaching - Opportunity to pitch for additional seed capital - Access to post-investment support Businesses will go through a rigorous multiphase selection process. Finalists will receive grant funding and have the opportunity to pitch for additional seed capital and access post-investment support. Eligibility criteria To qualify, businesses must meet the following criteria: - At least 51% youth-owned (ages 18-34) - At least 51% Black-owned (as defined by the Broad-Based Black Economic Empowerment Act) - Operational for at least 12 months - Based anywhere in South Africa - Annual turnover of less than R5m - Demonstrated growth potential Focus on scaling and sustainability South Africa's micro, small, and medium enterprises (MSMEs) contribute roughly 40% of GDP and employ more than 60% of the workforce. The Bindzu Youth Fund is intended to support these businesses as catalysts for economic growth. The Foundation says the fund is designed to strengthen business models, improve leadership, and enable sustainable scaling.

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into the world of global news and events? Download our app today from your preferred app store and start exploring.
app-storeplay-store