Fiscal Framework Vote: The Standing Committee on Finance will vote on the fiscal framework on April 1st, 2025. A deal between the ANC and DA appears likely, increasing the chances of passage.

Proposed VAT Increase: The framework includes a proposed 0.5 ppt VAT increase (revised down from an initial 2 ppt proposal) to fund increased spending. However, amendments remain possible before final approval.

Underlying Economic Challenges: South Africa’s economy grew poorly in 2024 (0.6% real, 4.5% nominal), with projections of around 1.5% growth in 2025 – significant downside risks exist. This weak growth is a central concern underlying the budget debate.

Debt and Funding Costs: National debt is at 76% of GDP, and interest payments consume 22% of gross revenues. The cost of funding exceeds the growth rate, making debt stabilization challenging.

Spending Inefficiencies: While increased spending is needed in crucial sectors (health, policing, education), significant waste, inefficiency, corruption, and contractual irregularities plague current expenditure. SOE bailouts pose additional fiscal risks.

Lack of Growth Strategy: The budget, while including some infrastructure spending increases (e.g., PRASA), lacks a comprehensive, growth-oriented framework. Experts emphasize the urgent need for a coherent growth plan to address the chronic fiscal challenges and improve the economy’s performance.

Provisional Spending: All spending allocations are currently provisional and subject to change. The final budget’s implementation hinges on the successful passage of the fiscal framework.

Sourced information from: 

Investec

For more info:

2025 Budget Speech, South Africa