Latest news with #R75bn
IOL News
5 days ago
- Business
- IOL News
Third time's the charm: Godongwana's 2025 budget finally approved
Minister of Finance, Enoch Godongwana's 2025 National Budget has finally been approved following the adoption of the fiscal framework that is the backbone of the budget. Image: Independent Newspapers Minister of Finance, Enoch Godongwana's 2025 National Budget has finally been approved following the adoption of the fiscal framework that is the backbone of the budget. This was Godongwana's third attempt to get the National Budget passed after an outcry over two proposals to increase VAT. During a joint meeting with Standing Committee on Finance, and the Select Committee on Finance, Members of Parliament adopted the document that establishes economic policy and revenue projections and sets the overall limits for government spending. The process, which took three hours on Wednesday, was not without its issues, with some members arguing that the process was flawed and that not everyone was able to make their voice heard. Insults also flew, with one member saying that her peers should 'learn to read'. In presenting the May 21 National Budget, Godongwana said there were no austerity measures, although government spending was held back. The fuel levy as well as sin taxes were increased. The budget invests over R1 trillion in critical infrastructure to lift economic growth prospects and improve access to basic services, Godongwana said on May 21. He added that this would be done without compromising the fiscal strategy of sustainable public finances. 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 ✕ Ad loading Government has achieved its balancing act by reducing additional spending over the medium term by R68 bilion after facing a R75bn revenue hole as VAT was not being increased. In May, Godongwana added that the government would continue to pay large amounts to service debt, which would amount to more than R1.3 trillion over the next three years. 'Put differently, this means in 2025/26 alone we are spending around R1.2bn per day to service our debt,' he said. IOL
IOL News
27-05-2025
- Automotive
- IOL News
Fuel levy increase raises alarm bells across the South Africa's automotive industry
fuel price petrol price The Automotive industry has had mixed reactions to the announcement on Wednesday by Finance Minister Enoch Godongwana in Budget Speech 3.0 that the fuel levy would be increasing by 16 cents Image: David Ritchie / Independent Newspapers The Automotive industry has expressed mixed reactions to the 16 cents per litre increase in the fuel levy announced by Finance Minister Enoch Godongwana in Budget Speech. The Automobile Association (AA) on Thursday responded to the announcement with apprehension, acknowledging the government's fiscal constraints while highlighting the immediate repercussions this levy increase will have on consumers and the broader economy. The AA added that this levy adjustment came at a time when South Africans were already contending with high food prices, elevated interest rates, increased electricity tariffs, and persistently high unemployment. 'Fuel is a critical input cost across all sectors of the economy; any increase inevitably drives up transport and operational costs, further intensifying inflation. Lower-income households, which spend a greater share of their income on transport, will be disproportionately affected by this rise,' it said. Adding to the chorus of criticism, Gavin Kelly, CEO of the Road Freight Association (RFA), emphasised that the increase would be felt directly by consumers. Kelly added that transport will become more expensive, consumers will pay more, and the old adage that the government can keep increasing taxes and levies to fund its uncontrolled spending remained true. 'This means that Treasury is 'finding' R4 billion towards the R75bn shortfall from the previous iteration of the budget - however, this underscores that Treasury would rather tax citizens than cut the wasteful expenditure that has brought the country to where it is,' Kelly said. 'Government does not have money - it belongs to the taxpayers, and the time for accountability and responsibility has come. Unfortunately, from June, the cost of logistics - 85% of which is run by road freight - will become more expensive. The consumer will pay more, transport through South Africa will become more expensive.' The South African Petroleum Retailers Association (Sapra) expressed alarm at the trade-off resulting from the cancellation of a proposed VAT increase. Sapra's national vice chairperson, Lebo Ramolahloane, said should the Budget be approved, this will be a blow to South African consumers and businesses. 'This price hike offsets much of the anticipated June price cuts of ~23 cents for petrol and ~50 cents for diesel, as projected by the Central Energy Fund (CEF). With Brent crude prices rebounding since the US-China tariff war pause on May 12, motorists face the prospect of higher pump prices, undermining recent relief,' Ramolahloane said. 'The 16/15c/l increase impacts the positive momentum that was being enjoyed from the previous three consecutive decreases. Should there be a decrease come 4 June 2025, it will be minimal due to the proposed increase on the General Fuel Levy.'
IOL News
20-05-2025
- Business
- IOL News
Expert insights on Enoch Godongwana's upcoming budget speech in South Africa
Experts have mixed feelings as Finance Minister Enoch Godongwana prepares to deliver his third expected budget speech on Wednesday. Image: Pixabay As South Africa braces for Finance Minister Enoch Godongwana's third budget speech on Wednesday, a wave of expert opinions reveals a landscape marked by both cautious optimism and pronounced concerns. With rising economic pressures and a growing budget deficit, Godongwana faces the complex task of generating revenue without curbing growth. Old Mutual chief economist Johann Els highlighted the anticipated revenue shortfall following the scrapping of a planned Value Added Tax (VAT) increase. Els estimated a loss of around R13.5 billion for the current year, with an alarming three-year total that could reach approximately R75bn. 'This will have to be made up for; Treasury will have to revise their gross domestic product (GDP) growth forecast downwards; they have it at 1.9% for 2025, but most forecasts have GDP around 1.5%,' he said. The ramifications of this budget speech extend beyond just lost tax revenue. Els said the budget speech was more than just a VAT increase that needed to be made up for. 'It is crucial that the government sticks to the deficit targets that they set in the first two budgets. Investors and rating agencies would not like it if the government tries to make up for the loss in revenue by borrowing more. It is crucial that they stick to the budget deficit target of 4.6% for this year, easing lower over the next few years to -3.5%. The primary surplus target of +0.9% rising to +2% over the next three years should be maintained. Crucially, the debt-to-GDP ratio peaking this year at 76.2% should be maintained. I think there needs to be significant expenditure cuts in this budget.' Professor Raymond Parsons, an economist at the North-West University (NWU) Business School, choed the sentiment that this budget could provide a much-needed opportunity. 'The third budget stands a good chance of being a successful one. It should benefit from the robust debate around the VAT controversy, which identified new options on both the spending and revenue of the budget to better 'balance the books'. The credibility of the budget will depend upon its ability to do two key things,' he said. Parsons added that the government needed to stick close to its original goal of a debt-to-GDP ratio of 76.2%, and second, strongly reflect what is now needed to meet the Government of National Unity's commitment to a 3% job-rich GDP growth target in the medium term. Neil Roets, CEO of Debt Rescue, welcome the confirmation that VAT will remain at 15%, sparing families from yet another blow, but said they remained concerned about the possibility of proposed increases in fuel levies and sin taxes. Roets said that equally troubling was the persistent budget deficit. 'The possibility of turning to 'stealth' measures such as bracket creep or frozen medical aid credits only shifts the burden onto consumers. We urge Minister Godongwana to prioritise spending efficiency rather than add to household strain,' he said. Benay Sager, Executive Head of DebtBusters, said that their expectation was spending cuts across the different departments as there just was not enough money to go around. 'We expect tax brackets to remain as they have been, and as a result of bracket creep, there will be more money coming in. We also expect additional taxes to be announced on things like, potentially, crypto and crypto trading and so on,' he said. Casey Sprake, economist at Anchor Capital, said that the central challenge of the third iteration of Budget 2025 liesd in how effectively the government responded to several mounting fiscal pressures. Sprake added that to offset the negative fiscal impacts, the government is likely to dial back some of the new spending introduced in the previous two Budget 2025 updates. 'In particular, increased allocations for frontline services are expected to be trimmed. However, Treasury is likely to protect infrastructure spending, positioning it as central to efforts aimed at boosting long-term economic growth,' Sprake said. Weekend Argus
IOL News
19-05-2025
- Business
- IOL News
Experts weigh in as South Africa prepares for critical budget speech 3. 0
Experts have mixed feelings as Finance Minister Enoch Godongwana prepares to deliver his third expected budget speech on Wednesday. Image: Pixabay As South Africa braces for Finance Minister Enoch Godongwana's third budget speech on Wednesday, a wave of expert opinions reveals a landscape marked by both cautious optimism and pronounced concerns. With rising economic pressures and a growing budget deficit, Godongwana faces the complex task of generating revenue without curbing growth. Old Mutual chief economist Johann Els highlighted the anticipated revenue shortfall following the scrapping of a planned Value Added Tax (VAT) increase. Els estimated a loss of around R13.5 billion for the current year, with an alarming three-year total that could reach approximately R75bn. 'This will have to be made up for; Treasury will have to revise their gross domestic product (GDP) growth forecast downwards; they have it at 1.9% for 2025, but most forecasts have GDP around 1.5%,' he said. 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 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. Next Stay Close ✕ The ramifications of this budget speech extend beyond just lost tax revenue. Els said the budget speech was more than just a VAT increase that needed to be made up for. 'It is crucial that the government sticks to the deficit targets that they set in the first two budgets. Investors and rating agencies would not like it if the government tries to make up for the loss in revenue by borrowing more. It is crucial that they stick to the budget deficit target of 4.6% for this year, easing lower over the next few years to -3.5%. The primary surplus target of +0.9% rising to +2% over the next three years should be maintained. Crucially, the debt-to-GDP ratio peaking this year at 76.2% should be maintained. I think there needs to be significant expenditure cuts in this budget.' Professor Raymond Parsons, an economist at the North-West University (NWU) Business School, choed the sentiment that this budget could provide a much-needed opportunity. 'The third budget stands a good chance of being a successful one. It should benefit from the robust debate around the VAT controversy, which identified new options on both the spending and revenue of the budget to better 'balance the books'. The credibility of the budget will depend upon its ability to do two key things,' he said. Parsons added that the government needed to stick close to its original goal of a debt-to-GDP ratio of 76.2%, and second, strongly reflect what is now needed to meet the Government of National Unity's commitment to a 3% job-rich GDP growth target in the medium term. Neil Roets, CEO of Debt Rescue, welcome the confirmation that VAT will remain at 15%, sparing families from yet another blow, but said they remained concerned about the possibility of proposed increases in fuel levies and sin taxes. Roets said that equally troubling was the persistent budget deficit. 'The possibility of turning to 'stealth' measures such as bracket creep or frozen medical aid credits only shifts the burden onto consumers. We urge Minister Godongwana to prioritise spending efficiency rather than add to household strain,' he said. Benay Sager, Executive Head of DebtBusters, said that their expectation was spending cuts across the different departments as there just was not enough money to go around. 'We expect tax brackets to remain as they have been, and as a result of bracket creep, there will be more money coming in. We also expect additional taxes to be announced on things like, potentially, crypto and crypto trading and so on,' he said. Casey Sprake, economist at Anchor Capital, said that the central challenge of the third iteration of Budget 2025 liesd in how effectively the government responded to several mounting fiscal pressures. Sprake added that to offset the negative fiscal impacts, the government is likely to dial back some of the new spending introduced in the previous two Budget 2025 updates. 'In particular, increased allocations for frontline services are expected to be trimmed. However, Treasury is likely to protect infrastructure spending, positioning it as central to efforts aimed at boosting long-term economic growth,' Sprake said. Visit:
TimesLIVE
17-05-2025
- Business
- TimesLIVE
Last chance budget to get green flag
Another insider said: 'There's happiness throughout. I don't know how he came up with this, I don't know how he made it [the budget] this good, but it just means it was doable from the start. He did his job.' This source said Godongwana was 'even working very well' with his DA deputy minister Ashor Sarupen. A fourth source said the spending cuts might have an even worse effect on poor people than a VAT increase would have had and predicted there would be 'long faces' in parliament. 'The amount of cuts or reductions is bigger than what VAT would have been had we left it,' this source said. The trade-off was that instead of increasing VAT, 'you will have to wait longer for your clinic, or you have to wait longer for us to fix this road, or you will have to wait for a train because we can't put in all the signalling equipment'. Godongwana's first budget included an additional R232.6bn over the medium-term expenditure framework to address spending pressures. One of the sources said the opposition to the VAT hikes meant Godongwana had no choice but to cut spending. 'So that's what parties have been doing since February,' this source said. 'In fact, what they said was 'we're not going to give you the means to spend an extra R232bn, we reject your proposal'. Then he came back in March with I think it was R179bn. 'The parties said 'we don't want to give you R179bn'. So, he is coming back now, and he is saying from the March version we are going to have to cut another R75bn.' Godongwana said last month scrapping the VAT hikes would result in a R75bn shortfall in his budget. To cover this, and in the absence of other revenue mechanisms, the minister is believed to have decided to slash expenditure by at least R60bn. 'Well, let's just say the tough choices finally have to be made,' one of the sources said, citing the International Monetary Fund's decision last month to cut its projection for GDP growth in South Africa this year from 1.5% to just 1%. 'We can't borrow more because revenue projections track GDP, so reducing the amount by which we add to the baseline [last October's medium-term budget] is the only option,' the source said.
