Postponed budget opens door for alternatives

The Institute for Economic Justice (IEJ) critiques a scrapped 2025 National Budget proposal for South Africa, specifically opposing a proposed two percentage point VAT increase. The IEJ argues that the National Treasury's focus on debt stabilisation through expenditure cuts and regressive taxes ignores the country's high unemployment and poverty levels. The statement proposes several progressive revenue-raising alternatives, including taxing wealth and luxury items, reducing tax breaks for high earners, and improving tax collection capacity.

• The IEJ argues that the National Treasury's fiscal strategy is ill-suited for South Africa's socio-economic reality, prioritizing debt stabilisation and a primary budget surplus of 0.5% of GDP in 2025 over addressing the fact that 12.3 million people are unemployed and over 18 million lived below the food poverty line as of 2015.
• The proposed two percentage point VAT increase is criticized as harmful to poor and low-income households, potentially reducing consumer buying power and increasing inflation. The IEJ notes that previous attempts to protect the vulnerable through zero-rating food had mixed success because suppliers did not always pass the benefits to consumers.
• The IEJ identifies several progressive alternatives to a VAT increase to raise revenue, including: improving SARS's collection capacity to close a R17-R20 billion shortfall; drawing further funds from the Gold and Foreign Exchange Contingency Reserve Account (GFECRA), which holds over R300 billion; and implementing a 25% luxury VAT rate, estimated in 2021 to raise R9 billion annually.
• The document suggests reducing preferential tax treatment, which the unpublished budget valued at R286.6 billion. Specific recommendations include removing medical aid tax rebates (costing R39 billion in 2022/23) and tax breaks on pension contributions for individuals earning over R750,000 per annum (which deprived the public of R82.6 billion in 2022/23).
• The IEJ proposes further revenue measures such as a net wealth tax (estimated to raise R70 to R160 billion annually), a 0.1% financial transactions tax (over R40 billion), a resource rent tax (R38 billion), and a social security tax (R64 billion).
• The statement highlights underinvestment in public services and infrastructure. It notes that combined public and private capital investment was only 15% of GDP in 2023, far below the National Development Plan's 30% target for 2030. It also points out that health spending per user in 2025 remains R104 below 2019 levels.
• The IEJ criticizes the handling of social grants in the scrapped budget. While most saw above-inflation increases, the Child Support Grant (CSG) increase to R580 remains below the food poverty line of R796. Furthermore, the Social Relief of Distress (SRD) grant received no increase in value or allocation, which was capped at R35 billion.
• Regarding debt management, the IEJ argues that the primary issue is the cost of debt rather than the level of borrowing. South Africa pays approximately 5% of GDP on public debt interest, significantly higher than the 2.2% average for developing countries and 1.8% for upper-middle-income countries.

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} }