BY: Saneliso Mlambo
Finance Minister Enoch Godongwana is expected to announce several tax hikes and new measures in his 2025 budget speech on February 19. This comes as the government grapples with rising costs, including bailouts for state-owned companies and expanded social spending.
Despite the economic challenges, South Africa reported a primary budget surplus last year, the first in 15 years. This surplus, amounting to R377 billion, arose from higher than expected mining revenue, with gold and platinum prices increasing by 38% and 7%, respectively.
The South African economy is projected to grow by at least 1.8% in 2025, according to Standard Bank’s chief economist Goolam Ballim. This is a significant improvement from the 0.7% GDP growth recorded last year.
South Africa’s debt-to-GDP ratio is projected to hit 74.7% this year, posing a challenge for the government in terms of interest payments.
The government is considering increasing taxes on alcohol, tobacco, and sugary beverages while the health promotion levy, commonly known as the sugar tax, may be increased to the recommended 20%.
There is also a possibility of a hike in the fuel levy, which hasn’t been increased since 2022.
A new wealth tax is also under discussion to address the budget shortfall.
While a VAT rate increase is unlikely, there may be changes to the zero rating of certain products to provide relief for households in distress. The current corporate tax rate of 27% is expected to remain unchanged.
The upcoming budget will be closely watched as South Africa navigates its economic challenges and seeks to stabilize its fiscal position.