Postponed budget opens door for alternatives

The Institute for Economic Justice (IEJ) critiques the South African National Treasury's focus on debt stabilisation through expenditure cuts and a proposed 2 percentage point VAT increase. The IEJ argues that such a VAT hike would harm poor households and may not generate substantial revenue due to potential decreases in consumer spending. Instead, the IEJ proposes six alternative revenue-raising strategies: improving SARS's collection capacity, drawing from the GFECRA account, removing unnecessary tax breaks, implementing a differentiated VAT system for luxury items, raising corporate and high-income tax rates, and taxing wealth. The document also suggests lowering the cost of borrowing through capital management and replacing broad expenditure cuts with a transparent spending review process.

• The National Treasury's fiscal strategy prioritizes debt stabilisation via a self-imposed fiscal anchor and a primary budget surplus of 0.5% of GDP in 2025, which the IEJ argues has been achieved through expenditure cuts that likely hampered GDP growth since 2012.
• A proposed two percentage point VAT increase is criticized for harming low-income households and potentially failing to generate expected revenue, citing a 2018 VAT increase that yielded R22 billion less than anticipated due to lower economic growth and changes in buyer behavior.
• Public spending on critical services remains inadequate; health spending per user in 2025 is R104 below 2019 levels, and the Child Support Grant (CSG) increase to R580 remains below the food poverty line of R796.
• The Social Relief of Distress (SRD) grant allocation was capped at R35 billion, which the IEJ claims is insufficient to cover the up to 18.3 million people who should qualify for support.
• South Africa's public and private capital investment was only 15% of GDP as of 2023, significantly below the National Development Plan's target of 30% by 2030.
• The IEJ proposes several progressive tax alternatives to replace the VAT hike, including drawing from the Gold and Foreign Exchange Contingency Reserve Account (GFECRA), which holds over R300 billion, and removing tax breaks that cost the fiscus R286.6 billion.
• The document suggests that implementing a net wealth tax could raise between R70 and R160 billion annually, and a 0.1% financial transactions tax could garner over R40 billion.
• South Africa's debt cost is highlighted as a primary challenge, with public debt interest payments at approximately 5% of GDP, compared to an upper-middle-income country average of 1.8%.

APA

Institute for Economic Justice (2025). Postponed budget opens door for alternatives. https://iej.org.za/wp-content/uploads/2025/02/IEJ-statement-Budget-alternatives.pdf

Chicago

Institute for Economic Justice. Postponed budget opens door for alternatives. 2025. https://iej.org.za/wp-content/uploads/2025/02/IEJ-statement-Budget-alternatives.pdf.

Wikipedia

{{cite press release |author=Institute for Economic Justice |title=Postponed budget opens door for alternatives |date=23 February 2025 |url=https://iej.org.za/wp-content/uploads/2025/02/IEJ-statement-Budget-alternatives.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@misc{instituteforeconomicjustice2025postponed, author = {{Institute for Economic Justice}}, title = {{Postponed budget opens door for alternatives}}, publisher = {Institute for Economic Justice}, year = {2025}, month = feb, url = {https://iej.org.za/wp-content/uploads/2025/02/IEJ-statement-Budget-alternatives.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }