MEDIA STATEMENT
Johannesburg, Wednesday, 12 March 2025 - Public Interest SA acknowledges the challenges surrounding the national Budget and the policy pronouncements aimed at addressing South Africa’s economic stagnation. While the delay in presenting the Budget was regrettable, we recognise the opportunity it has provided for heightened public discourse on the country’s economic and fiscal future. However, we remain concerned about the government’s proposed approach to revenue generation and economic growth, particularly the planned increase in the Value-Added Tax (VAT) rate and the broader fiscal strategy.
Economic Growth and Fiscal Strategy
South Africa’s prolonged economic stagnation demands a bold and transformative strategy that prioritises sustainable growth, job creation, and economic inclusivity. While the government’s focus on macroeconomic stability and structural reforms is commendable, these measures must be accompanied by robust efforts to stimulate economic participation, particularly for historically marginalised communities.
The projected GDP growth rate of 1.8% over the medium term is insufficient to address the country’s pressing socio-economic needs, including unemployment, inequality, and service delivery deficits. Public Interest SA urges the government to expedite pro-growth policies that foster investment, reduce red tape for businesses, and strengthen public-private partnerships to drive economic expansion.
VAT Increase and Tax Policy Considerations
The government’s decision to raise the VAT rate from 15% to 16% by 2026/27 as a revenue-generating measure is deeply concerning. VAT is a regressive tax that disproportionately impacts lower-income households, many of whom already struggle with the high cost of living. While the government argues that this is the most viable option given the limitations of corporate and personal income tax adjustments, we call for a more progressive taxation approach that prioritises wealth taxes and enhanced tax enforcement on high-net-worth individuals and corporations that engage in tax avoidance and evasion.
The South African Revenue Service (SARS) must intensify efforts to expand the tax base by targeting tax non-compliance and illicit financial flows. The reported 156,000 unregistered taxpayers and billions of Rands in undisputed debt owed to the state underscore the need for improved enforcement before imposing additional tax burdens on already strained households.
Infrastructure Investment and Public Sector Management
We welcome the government’s commitment to infrastructure investment, with over R1 trillion allocated over the next three years. Investment in transport, energy, and water infrastructure is critical to economic recovery and long-term sustainability. However, the effectiveness of these investments hinges on sound governance, transparent procurement processes, and stringent anti-corruption measures. Public Interest SA urges the government to prioritise oversight mechanisms to prevent mismanagement and ensure value for money in infrastructure spending.
Furthermore, the proposed wage bill measures, including early retirement initiatives, should be carefully implemented to avoid unintended consequences such as the depletion of critical skills within the public sector. Government must ensure that the drive for fiscal consolidation does not compromise essential public services, particularly in health, education, and security.
Commitment to Good Governance and Anti-Corruption Efforts
We note the budgetary allocations towards strengthening financial forensic capabilities and law enforcement agencies tasked with combating corruption and financial crimes. These initiatives are crucial in addressing the lingering effects of state capture and enhancing institutional integrity. However, beyond budgetary allocations, there is an urgent need for tangible reforms that enhance transparency, accountability, and the protection of whistleblowers who expose corruption.
Call for Inclusive Economic Policy Reforms
Public Interest SA calls on the government to:
Reconsider the VAT increase and explore more progressive taxation options.
Accelerate structural reforms that promote private sector investment and job creation.
Strengthen enforcement mechanisms to combat tax evasion and illicit financial flows.
Ensure transparency and accountability in infrastructure projects to prevent corruption and inefficiencies.
Prioritise economic policies that foster inclusive growth and address historical inequalities.
South Africa requires decisive and forward-thinking economic policies that prioritise long-term prosperity over short-term revenue measures. Public Interest SA remains committed to advocating for policies that advance economic justice, transparency, and good governance.
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