How Budget 3. 0's focus on infrastructure investment could transform South Africa's property market
Pressure is mounting on Finance Minister Enoch Godongwana as he is expected to table the National Budget Review for the third attempt in Parliament on Wednesday after tensions within the Government of National Unity coalition over an increase in value-added tax (VAT) rates led to the budget being amended and re-tabled three times.
Image: File
As the Finance Minister Enoch Godongwana re-tables the revised National Budget on Wednesday, the major expectation will be around the fiscal aggregates, specifically the budget deficit and debt-to-GDP ratio.
Professor Waldo Krugell, an economist from the School of Economic Sciences at the North-West University, said whatever spending cuts the Minister comes up with will still need to protect frontline services and maintain the path of fiscal consolidation.
'The influence on the property sector is quite indirect, but if he is able to do that, it can increase business confidence and investment in general, and that is good for property. A more sustainable fiscal stance will also help to bring down interest rates on long-term government debt, which is good for other interest rates in the long run,' Krugell said.
Dr Meshel Muzuva, the Academic Programme Leader at the Management College of Southern Africa's (MANCOSA) School of Business Excellence, said as South Africa prepares for the re-tabling of what is now known as Budget 3.0, expectations are high, and the stakes are even higher.
She said this iteration of the national budget arrives amid a shifting political landscape, a weakened growth outlook, and growing fiscal pressures.
'It is more than just a reset; it is an opportunity to reinforce fiscal credibility while laying the groundwork for inclusive economic recovery,' Muzuva said.
She added that with GDP projections revised downward and inflation easing, the Finance Minister faces the tough task of balancing lower tax revenues against growing spending demands, all while maintaining the commitment to fiscal consolidation.
'Despite some relief in the form of improved corporate tax collections and a R15 billion closing cash surplus, fiscal space remains tight. The main budget deficit has improved slightly to 4.5% of GDP (Investec, 2025), but with debt levels still elevated, tough trade-offs are inevitable.'
For the property sector, the academic said the budget is a significant development. She said they would be looking out for infrastructure investment in increased allocations to transport, energy, and housing as this could unlock new development opportunities and boost land values.
She said they will also be looking for tax policy as changes to transfer duties, capital gains tax, or bracket creep could impact property transactions and investor confidence.
'Any upward shift in transaction costs would likely dampen demand, especially in the mid-tier and high-end residential markets.'
Muzuva said that while the South African Reserve Bank (SARB) sets rates, fiscal policy can influence borrowing costs. She said a stable budget could help ease long-term interest rate pressures, benefiting mortgage affordability and real estate financing.
Video Player is loading.
Play Video
Play
Unmute
Current Time
0:00
/
Duration
-:-
Loaded :
0%
Stream Type LIVE
Seek to live, currently behind live
LIVE
Remaining Time
-
0:00
This is a modal window.
Beginning of dialog window. Escape will cancel and close the window.
Text Color White Black Red Green Blue Yellow Magenta Cyan
Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan
Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan
Transparency Transparent Semi-Transparent Opaque
Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps
Reset
restore all settings to the default values Done
Close Modal Dialog
End of dialog window.
Advertisement
Next
Stay
Close ✕
The academic added that they would also be looking for housing incentives as government support for affordable housing or urban densification initiatives would be welcomed by the sector.
However, she warned that, given current fiscal limitations, expectations around substantial incentives should remain measured.
Tsekiso Machike, the spokesperson for the Minister of Human Settlements, said that the shrinking government's fiscus with the department budget cuts and like any other government department and institution.
'We would appreciate it if we could be allocated more money to enable the department to accelerate its housing delivery programme to the deserving and qualifying beneficiaries and eradicate the housing backlog.
"However, we are looking forward to the upcoming Budget and are optimistic that there will be a reasonable allocation of funds to the department under the circumstances of budget cuts and constraints,' Machike said.
Adrian Goslett, CEO of RE/MAX of Southern Africa and chairman of the Real Estate Business Owners of South Africa (REBOSA) notes that this about-face was born of coalition politics, but said it ultimately reflects a commitment to stable, consensus-driven economic management, a factor he views as crucial for investor confidence in the country.
'When the Budget 3.0 is announced, I'll be focusing on the scrapped VAT increase and how the government plans to compensate for the revenue gap – hopefully, there will be no reversal of the increased exemption threshold for transfer duty from R1.1 million to R1.21 million,' Goslett said.
He said one of the less visible but critical outcomes of the budget saga is its impact on the interest rate outlook. '
By avoiding a VAT-induced price spike, Budget 3.0 removes one potential upward driver of inflation, which could help the case for interest rates to remain steady (or even ease) later in the year,' Goslett said.
Muzuva said Budget 3.0 is a pivotal opportunity to restore confidence. She added that for the property sector, the focus will be on whether the government can prioritise growth-enabling investments, protect infrastructure commitments, and send a clear signal that South Africa remains open for investment even in a constrained fiscal climate.
Reezwan Sumad, a research analyst at Nedbank CIB, said on Tuesday morning, the local markets are likely to remain cautious ahead of both the budget and the meeting between the South African and American delegations on Wednesday.
'Until the outcomes of these are known, participants are likely to remain on the sidelines,' Sumad said.
Independent Media Property
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Daily Maverick
24 minutes ago
- Daily Maverick
South Africa's SMMEs are flying blind in a changing global order
Small businesses are yet again expected to absorb the shocks of stalling growth, economic policy and diplomacy. Small businesses are expected to keep the lights on, even as South Africa stumbles through an increasingly volatile global and domestic economic environment. While a 25 basis point rate cut at month end offered some respite, it's hardly the lifeline small, medium and micro enterprises (SMMEs) need, said Miguel da Silva, executive of business banking at TymeBank in the bank's SMME forecast for June. 'Some diminishing pressure on the cost of credit' followed the South African Reserve Bank's cut, Da Silva said. Yet, he said 'the economy needs every bit of help it can get'. VAT relief with a fuel levy sting The National Treasury's decision to hold VAT steady at 15% provided some short-term relief to cash-strapped SMMEs. But the olive branch came with a thorn. As of 4 June, petrol and diesel prices jumped by 16c and 15c per litre respectively. 'With many small businesses already operating on razor-thin margins, this 16c increase will likely be passed on to consumers, potentially dampening demand in an already constrained market,' Da Silva said. This adaptation to the Budget showcases the government's strained fiscal position. In a podcast discussion on Budget 3.0, Stanlib chief economist Kevin Lings pointed out that until South Africa lifts GDP growth above 3%, pressure on public finances will persist. 'The negative revenue impact from backtracking on the VAT increases proposed in the previous version of the Budget, as well as the weaker economic growth trajectory, is counteracted… by a combination of revenue and spending adjustments,' explained Dr Elna Moolman, Standard Bank Group head of South African macroeconomic research. 'The expenditure changes are dominated by scaling back some of the new spending proposed in the previous versions of the Budget, while the revenue adjustments include both the reversal of some of the tax relief previously proposed… and unspecified future tax hikes.' The Budget foreshadows a pivot to removing the regulatory burden on businesses. Though, as Da Silva noted, no specific SME-support programmes, funding initiatives or targeted relief measures have emerged. Q1 data highlights on the scale of struggle The economic scoreboard from Q1 depicts an economy in stagnation: GDP grew by just 0.1% in Q1 2025, with agriculture (+15.8%) the only area showing growth. The National Treasury revised 2025 growth expectations downward from 1.6%, from 1.8%. Official unemployment rose to 32.9%, from 31.9%, which translates to a decrease of 54,000 in the labour force. Youth unemployment increased to 46.1% from 44.6% in the first quarter of 2024. While the SME SA Funding Summit 2025 on Thursday, 12 June is expected to explore access to finance, Da Silva stressed that a functioning, reliable environment matters more. How does this affect you? No real relief for entrepreneurs: if you're running a small business, don't hold your breath for targeted funding or tax breaks. Government promises of support remain vague. Price volatility on imports and exports: If Agoa collapses or BRICS moves away from the dollar, expect price changes in imported goods and export delays. Policy fog = business risk: If you're a customer, supplier or entrepreneur, inconsistent policy and mixed messages from government and diplomats create risk, which translates into cautious spending, higher borrowing costs and business hesitancy. Agoa and the diplomatic see-saw South Africa's trade diplomacy with the US remains complicated, but functional for now. Trade Minister Parks Tau and Agriculture Minister John Steenhuisen delivered a new framework to US Trade Representative Jamieson Greer on 19 May, laying out a new bilateral trade proposal. 'We met and had a very cordial and constructive meeting with Ambassador Greer… We had a very open and frank exchange about how we can ensure mutually beneficial trade between South Africa and the United States of America,' said Steenhuisen. He further noted that 'the importance of both markets for each other, and obviously a lot of emphasis from the American side [on] wanting to rebalance some of the trade… and from our side, wanting to retain market access'. With Agoa set to expire in September 2025, a renewal is looking uncertain. Da Silva said that 'the complex challenge of either finding alternative markets or restructuring their operations' looms large for SMME suppliers in US markets. 'While the US is not our largest trading partner, it is an important one, with 8% of our exports destined for its shores,' said Maarten Ackerman, chief economist at Citadel. 'Of that 8%, a third is excluded from tariffs, but citrus exporters are likely to be hardest hit.' BRICS Summit brings new questions Then there's the BRICS Summit in Brazil in early July, where stakeholders are expected to discuss mechanisms to alleviate dependency on the dollar. 'For SMEs, particularly those in export-oriented sectors, this diplomatic tightrope walk translates into very real business planning challenges,' Da Silva explained. Navigating dual allegiances between BRICS and the West 'requires SMEs to develop strategies that can withstand diplomatic volatility while capitalising on emerging opportunities', Da Silva said. DM
IOL News
5 hours ago
- IOL News
Rand strengthens below R17,70 amid budget optimism and a softer dollar
Having opened at R17.77 on Monday morning, it continued to trade around that level for the bulk of the day and was at R17.73 as of around 2.30pm. It was last at these levels around mid-December last year. Image: GCIS / File The rand is testing levels below R17.70 to the dollar on a range of factors that include persistent greenback weakness, renewed local confidence following the passage of the third iteration of the National Budget, as well as hints that the inflation target may be dropped to 3% instead of the current 3% to 6% range. Having opened at R17.77 on Monday morning, it continued to trade around that level for the bulk of the day and was at R17.73 as of around 2.30pm. It was last at these levels around mid-December last year. Bianca Botes, director of Citadel Global, explained that the weakening of the dollar has been the biggest short-term driver for the rand. 'When the dollar weakens, often due to softer US economic data or expectations of US interest rate cuts, the rand tends to strengthen,' she said. So far this year, the rand is 5.7% stronger against the dollar, leading the emerging market currency charge, said Botes. The dollar index is softer by 6.6% over the past six months, indicating the broad-based weakness of the currency, she added. Yet, Investec chief economist, Annabel Bishop, stated that the local currency was not gaining ground against the euro and pound. 'US dollar weakness has been driven by the volatility in US tariffs and uncertainty for the US economy and so global growth, as the US has hiked tariffs steeply then paused, or rolled them back, then re-embarked on tariff increases again in April,' she said. Nolan Wapenaar, co-chief investment officer at Anchor Capital, said that, 'perhaps most tellingly,' the weaker greenback, further de-escalation of the tariffs given recent trade talks as well as less political risk will help the local currency. Botes also noted that, as a commodity linked currency, the rand is sensitive to global product prices. 'The prolonged and drastic gold rally, coupled with a weak oil price, assisted the terms of trade and underscored the rand's strength,' she said. Johann Els, Old Mutual's chief economist, said that the rand is benefiting from the recent soothing of global trade tensions, the passing of the National Budget, easing of concerns that the DA won't walk away from the Government of National Unity as well as higher prices of those commodities that South Africa exports when compared with relatively low price of the country's main import of oil. Wapenaar explained that the rand has also strengthened because a 'sensible budget was passed, and tariffs have been paused and softened'. The South African Reserve Bank's (SARB's) cautious approach to interest rates, cutting rates less aggressively than expected, has helped support the rand by maintaining a favourable interest rate differential with the US, said Botes. 'Anticipated US rate cuts later in 2025 could further benefit the rand if local rates remain steady,' she added. 'We also note that the discussion of a 3% inflation target in South Africa is rand positive and should this progress, we will likely see further strength in the rand,' said Wapenaar. On announcing the decision of the Monetary Policy Committee to, as expected, drop the interest rate by 0.25 percentage points on May 21, SARB Governor, Lesetja Kganyago said that dropping the inflation target to 3% would result in South Africa being a low-inflation, low-interest rate country, which would bring with it economic growth. 'The renewed focus on a lower inflation target is also helping as this will not only reduce pressure on the rand, but also lead to lower interest rates over time,' said Els, adding that this would be beneficial for the economy, while also aiding in fixing government finances. 'I see further strength in the rand over the next few weeks and months, moving closer to R17, and potentially into the R16-handle territory on a short-term basis,' Els said. Bishop noted that the US dollar is expected to see further weakness this year, which would add to the rand's strength against the greenback, and the moderate nature of consumer price inflation, with another fuel price cut due this month. 'The rand's strength against the US dollar this year has contributed significantly towards lower inflation in South Africa,' she said. IOL
Mail & Guardian
6 hours ago
- Mail & Guardian
At least three officials must collude to create one ghost worker, says public service chairperson
Graphic: John McCann/M&G Creating one ghost employee on the public payroll requires the collusion of at least three officials, the chairperson of parliament's portfolio committee on public service and administration said on Monday. Jan de Villiers also said that the era of treating ghost workers as a clerical irregularity was over. 'This is not merely a payroll anomaly. It is a deliberate and orchestrated form of The briefing follows a renewed government focus on eliminating waste and corruption in the public sector wage bill, triggered by Finance Minister Enoch Godongwana's Godongwana announced a sweeping expenditure review of more than R300 billion in government spending since 2013, using a data-driven strategy to root out inefficiencies, including ghost employees. De Villiers said the portfolio committee, acting on this directive, convened on 28 May to interrogate the pervasive and corrosive problem of ghost workers. Its conclusion was that the issue was systemic, criminal and far more widespread than previously acknowledged. 'The department of public service and administration confirmed before parliament that ghost workers are present across all three spheres of government — national, provincial and municipal. They are also embedded in state-owned entities and agencies,' De Villiers said. Among the examples cited were 230 unverifiable employees whose salaries were frozen by the Gauteng department of health in May, and R6.4 million in salaries paid to ghost workers in the Mpumalanga department of education, which was uncovered by the During a September 2024 hearing, the standing committee on public accounts was briefed by the Special Investigating Unit (SIU) on the discovery of 1 277 ghost employees in the Passenger Rail Agency of South Africa's (Prasa) system. According to the SIU, These were not isolated incidents, De Villiers warned. 'The numbers are staggering. They are not anomalies. They are symptoms of a system that needs structural intervention.' The creation of a ghost employee required collusion, De Villiers said. 'At least three officials need to work together to insert a ghost worker into the payroll system. This means we are dealing not with random lapses in judgment, but embedded criminal syndicates.' Although efforts were under way to identify and remove ghost employees through integrated audits between the department and the treasury, De Villiers said more was required. 'A data audit alone is not enough. Every person drawing a public salary must be verified in person and through biometric identification. The public has the right to know the names on the payroll correspond to individuals who really exist and who serve the public,' he said. 'Currently, the three tier authentication system used to validate employee status is open to manipulation. Internal controls have failed. Oversight has been diluted. The opportunity for fraud persists because the tools needed to prevent it have not been enforced, and worse, have been exploited by those meant to protect them.' Departments must take the lead in developing a formalised framework to ensure protection and prevention, and regular audits searching for ghost employees should be carried out, he said. The framework will mandate formal, periodic payroll audits and reconciliation, in person verification and biometric registration, centralised authorisation of appointments and terminations and digital certification of employee attendance and performance. The committee would also call on the auditor general to expand its scope, said De Villiers, requiring that all department and entity audits include a verification of whether internal ghost employees audits have been conducted and whether they were done credibly. 'We will push for disciplinary and criminal action to follow every detection of ghost workers. Names must be handed over to the SIU, the Hawks and the South African Police Service. Fraudsters must not be shielded by departmental silence or internal collusion,' he said. Consequences of inaction were 'grave', he added. 'Every ghost worker represents a post that could have 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, responsive state. 'In light of this, the portfolio committee cannot and will not stand idle. Among our priorities in the seventh parliament is to push for the cleanup of the PERSAL system, which remains the foundation of the human resources and vital records in the public sector.' Incomplete performance reviews, poor attendance tracking, and manual leave registers must become early warning indicators, and should trigger automatic investigations. Asked by journalists about the departments most affected by ghost workers, De Villiers said the issue was impossible to localise. 'Every single department, agency, level of government, and state-owned enterprise probably has ghost workers,' he said. But, he added, positions that involved out-of-office work were more easily exploited. He said the lack of uniformity in how public servants were employed — each department using its own HR processes without central oversight — was part of the problem. 'We need a national approach, led jointly by DPSA [department of public service and administration] and treasury, and involving the auditor general, Cogta [department of cooperative governance and traditional affairs] and law enforcement.' The departments would reconvene in the third quarter of 2025 to review progress, scope, preliminary findings, and enforcement mechanisms, De Villiers said. 'This is not going to be another talk shop.'
