Budget 3.0: No VAT hike, but fuel levy increases coming
After two failed tries, Finance Minister Enoch Godongwana finally tabled the 2025 Budget, replacing a scrapped VAT increase with a fuel levy hike.
FILE: Finance Minister Enoch Godongwana. Picture: GCIS
CapeTalk's Lester Kiewit speaks to Duma Gqubule, an independent economist.
Listen below:
It was third time lucky for Finance Minister Enoch Godongwana, who finally delivered the 2025 National Budget Speech on Wednesday.
Two earlier attempts failed, largely due to a proposed increase in value-added tax (VAT).
While there will be no VAT increase, Godongwana announced an increase in the fuel levy from 4 June as one of the measures to fund the budget shortfall left by the reversal of the VAT hike.
"The first budget in February was criticised for its optimistic GDP growth [projections]... they've reduced the GDP forecast to 1.4%. I believe it's still improbable."
- Duma Gqubule, Economist
Gqubule says most economists are predicting GDP growth to be closer to 1%.
But 1%, he says, is not enough for the economy to create jobs.
"So the government is saying they have run out of ideas on how to grow the economy."
- Duma Gqubule, Economist
"We're just going to continue like we've been doing for the past 16 years, so I'm arguing that we can't continue like this."
- Duma Gqubule, Economist
Withdrawing the VAT hike and the lower GDP forecast means there is R62 billion less revenue to factor in over the next three years.
The Minister also made it clear they are determined to end wasteful expenditure and instead see these funds ploughed into the economy.
"The structural reforms are not large enough to shift the dial in terms of the need for investment in this economy."
- Duma Gqubule, Economist
The new budget indicates cuts of R69.4 billion over three years, with education, health, the Home Affairs Department and Transnet seeing the biggest losses.
"The issue here is that there has been a collapse of public sector investment over the last 10 years."
- Duma Gqubule, Economist
"There is no logic in the government continuing with the public sector investment strike."
- Duma Gqubule, Economist
Godongwana is also following through on his promise to give Sars R7 billion to help them gather more revenue next year, which could be an additional R20 billion.
Scroll up to the audio player to listen to the interview.