Budget Speech: 'I will be surprised if this VAT increase goes through' - Dawie Roodt, Economist

Kfm Mornings with Darren, Sherlin and Sibs discuss the Budget Speech with economist Dawie Roodt. 

Listen below:

Finance Minister Enoch Godongwana presented his 2025/2026 Budget Speech on Wednesday, 12 March.

Roodt breaks down the numbers...

There are 65 million people in South Africa and anyone who touches money will pay tax, says Roodt. 

However, everyone doesn't pay the same kind of tax. 

"Personal Income Tax is the single most important revenue source for the Minister of Finance - that contributes about 40% to the total budget."

About 245,000 individuals in South Africa pay a third of personal income tax while about one and a half million individuals pay about 70% of personal income tax.

The second most important tax is Value Added Tax (VAT), followed by corporate taxes. "Companies don't really pay taxes because they shift their total tax burdens on the individuals in the end," explains Roodt. 

"There are 30 million people getting an income from the State monthly. There are two million civil servants while there are less than 15 million people working in the private sector which means then, there are more than two people getting an income from the State for every person who works in the private sector.

"If we calculate the redistributive impact of the fiscus, what I mean by that is, who's doing the paying and who's getting the revenue from the Minister of Finance? The South African fiscus or budget then, is the most redistributive budget in the world because the guys doing the paying are not the guys getting the money back from the Minister of Finance," adds Roodt.

Converting grant recipients into working South Africans by creating more jobs 'should without a doubt' be a priority to grow the economy, says Roodt. 

The Minister of Finance forecasts the economy to grow by 1.9% this year. Roodt says this is 'not something anybody should be proud of' and doubts whether it's achievable.

"We're not going to grow the economy; the Minister of Finance also agrees with me. He's pencilled in 1.9% economic growth for this year, and years thereafter, more or less, but I don't think we're going to get to 1.9%... So, the Minister of Finance even doesn't have confidence in his own economic policies because I mean, 1.9% of economic growth which I don't believe will be achieved, is certainly not something anybody should be proud of."

- Dawie Roodt, Economist

Roodt also comments on the proposed 0.5% VAT increase.

"It seems to me as if the other political parties are not going to support this... All taxes are always bad but some taxes are worse...VAT is one of those less bad taxes, so if there's an increase in VAT, I would certainly support that, but then we must cut back on other worse taxes and worse taxes are for example, company or corporate taxes."

- Dawie Roodt, Economist

"But what is happening now, is that there's an increase in VAT and a substantial increase in personal income taxes... and that means the State is getting more money...  and if you give politicians more money, they spend more money and the only way you can get politicians to spend less money is simply not to give the money... that is where we are at the moment."

- Dawie Roodt, Economist

"I think what eventually will happen is that there'll be some sort of compromise and I will really be surprised if this VAT increase really goes through."

- Dawie Roodt, Economist

Roodt believes cutting back on State spending can be a possible solution.

"We've run out of money, quite literally and now they're starting to look at really improving the efficiency of the state and see whether we have to spend money on all these things that they are spending money on... So, the VAT increase... No, I'm not in favour of that in the current environment. What we must do, is cut back on State spending and that hasn't really happened yet."

- Dawie Roodt, Economist

If the rest of GNU doesn't agree with the budget, things can become 'very messy', says Roodt.

"While debate isn't a bad thing, people who are not financial experts are going to demand other unreasonable things and that means this whole thing can become very messy."

Scroll up to the audio player to listen to the full conversation.

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'We can't increase taxes. That’s simply out of the question' - Dawie Roodt, economist