Johannesburg, 11 March 2025 ― After its unexpected postponement due to disagreements between the partners in the Government of National Unity (GNU), the 2025 Budget needs to reduce the policy and economic uncertainty in the country by showing:
- The parties can manage their political differences and meaningfully co-operate in the interests of all South Africans.
- That the GNU is committed to pragmatic programmes and policies that are focused on facilitating inclusive economic growth, the only way to sustainably reduce unemployment, poverty, and inequality.
- That the GNU is committed to responsible fiscal management, necessary to ensure that South Africa has the capacity – and will not need to depend on others – to cope with the present global political and economic upheaval.
In a nutshell, South Africa needs a revenue strategy to reduce debt while supporting initiatives targeted at economic growth. This will require difficult trade-offs, which necessitate proper consultation and a constructive national conversation to agree on a path to higher levels of inclusive economic growth. BUSA recommends that, rather than resorting to tax increases, National Treasury focuses on broadening the tax base and improving tax compliance. This can be done by strengthening the capacity of the South African Revenue Service (SARS) to improve tax compliance, enforce controls on illicit trade, and improve efficiency in revenue collection.
Tax hikes are not a viable solution, especially increases in value-added tax (VAT), personal income tax (PIT), or corporate income tax (CIT). South Africa’s already narrow tax base cannot bear further burdens, and tax increases will stifle economic growth. Increases in PIT – and other fees and levies – will weaken consumer spending, reduce household disposable income, and erode investor confidence. International experience has shown that annual net wealth taxes often do not result in significant additional revenues, while the costs of compliance and administration are high, as avoidance and evasion become commonplace. There are also significant challenges with valuing some classes of assets.
The Davis Tax Committee warned of these challenges and recommended that information on the market value of assets be gathered by SARS to assist with a future decision about a wealth tax. This only commenced in the 2023 filing season. It is doubtful that sufficient analysis of this information could have been undertaken to properly inform a decision about a wealth tax at this stage. Rather than imposing an additional tax burden, the focus should be on fostering an environment conducive to business growth and attracting investments.
South Africa is a savings-scarce country, which needs to attract capital for financing infrastructure and development. Any tax policy considerations must strike a balance between current revenue needs and future government spending. Taking on more debt is not advised, as South Africa’s rising debt costs and budget deficits continue to pose significant challenges. Business continues to call for the introduction of an effective, robust fiscal rule, which will serve as an anchor to ensure compliance and accountability in government spending. Maintaining strict fiscal discipline during this period of global uncertainty is going to be important to protect South Africa’s fiscal sustainability.
A strategic approach is needed to identify savings, eliminate inefficiencies, and address wasteful expenditure. This needs to be done through a considered review of programmes that can be eliminated and the state assets that can be sold. Widespread shaving of spending is no longer enough, and wasteful and unproductive spending needs to be eliminated wholesale. Spending must be redirected to key priorities that support a pro-growth agenda and support necessary increases in education, healthcare, and infrastructure. Ultimately, government spending needs to deliver measurable economic benefits that bolster growth.
Ends
Khulekani Mathe
Business Unity South Africa CEO
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Sizwe Maswanganye
BUSA Communications Coordinator
Tel: 011 784 8000/0766516444
