Godongwana: Economy must grow faster to meet goals
Finance Minister Enoch Godongwana said the
government is aware that South Africa's economy needs to grow faster than the
current rate.
He said fast economic growth would allow the government to meet its goals of redistribution, redress, and structural transformation.
In his 2025 budget speech on Wednesday afternoon, Godongwana said while there is debate around VAT increases, the real conversation should be about the economy's expansion.
"The truth is that our economy has stagnated for over a decade. In that time, GDP growth has averaged less than 2%, far below the level required to meet our expanding list of needs.
"In 2024, the economy grew by only 0.6%. Over the medium term, GDP growth is projected to average 1.8%."
READ: Godongwana announces dreaded VAT increase
Godongwana said the government remained committed to a balanced fiscal strategy
However, he said the debt service cost is currently standing at over R380 billion.
"This translates to 22 cents of every rand we raise in revenue. It is more than what we spend on health, the police, or basic education. We must reverse this trend and prevent the cost of debt from taking away resources that could otherwise be spent on our pressing social needs or to invest in growth."
Godongwana announced a lower VAT hike than what had been previously proposed.
"To raise the revenue needed, the government proposed to increase VAT rate by half a percentage point in 2025/2026 and by another half a percentage point in the following year. This will bring the VAT rate to 16% by 2026/2027."
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He apologised for postponing last month's budget speech after parties in the GNU reached an impasse on a proposed two-percentage-point VAT increase.
The minister described the debate as a sign of a maturing democracy.
"But what is positive is that the delay has stimulated an unprecedented level of public debate about the difficult policy trade-offs we as a nation face.
"A vital debate about which policies to fund and how to fund them, about which priorities to pursue now and which ones we may need to delay in the context of unlimited resources."
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