Project CBNews

South Africa's recently unveiled Budget 2025 has fallen short of expectations, particularly in its commitment to inclusive economic growth. Economic analyst Kalnisha Singh described the budget as "hugely disappointing" during a recent interview, highlighting that it fails to reflect the promises made during the State of the Nation Address.

Austerity Without Vision

While the budget demonstrates fiscal discipline through reduced debt burdens and decreased allocations to state-owned enterprises (SOEs), it lacks substantive measures to promote sustainable long-term economic growth or improve conditions for those living in poverty. "What the budget did not do was do anything to promote sustainability, long-term economic growth, improved a lot of people living in poverty," Singh explained. "And that was the great disappointment."

VAT Increase: A Burden on Consumers

One of the most concerning aspects of the budget is the phased increase in Value Added Tax (VAT). This measure will add approximately R2.5 billion to the budget—a figure that Singh argues could have been achieved through improving efficiencies in existing systems. "The total amount of the budget that is lost due to corruption in the social development sector... amounts to in excess of R5 billion," Singh noted. This includes grants being issued to ineligible recipients and payments continuing after recipients have died. The VAT increase will have cascading effects throughout the economy. Businesses facing higher costs will pass these increases on to consumers, affecting everything from groceries and personal care items to electricity and services.

Middle Class Bearing the Burden

South African consumers have already been shouldering the burden of state failures, including the energy crisis that has resulted in load shedding. The additional VAT increase will further strain household budgets that are already stretched thin. "We have been bearing the burden as consumers in this economy of failures of the states," Singh stated. She pointed out that higher costs for basic goods like eggs and meat are directly related to farmers' need to install off-grid power solutions due to unreliable electricity supply.

Missed Opportunities for Tax Relief

The budget also failed to adjust tax brackets in line with inflation, meaning that many South Africans receiving cost-of-living salary increases will find themselves pushed into higher tax brackets, effectively increasing their tax burden. "Given that salaries are increasing, what we would expect is for the tax brackets to be adjusted with that salary increase," Singh explained. The lack of such adjustments represents another way in which the budget will negatively impact ordinary South Africans.

Debt Concerns

South Africa's debt servicing costs amount to approximately 15% of the total debt—a figure Singh describes as "very high." More concerning is the fact that the budget does not adequately address the root causes of this debt or implement measures to prevent similar problems in the future. "We haven't scratched the surface with why we are in this situation first, and we've done nothing to solve those problems," Singh said.

Looking Forward

Despite the disappointment with Budget 2025, Singh remains cautiously optimistic about South Africa's future. She acknowledges that the Government of National Unity is still new and that these policy makers are working together for the first time on such a significant undertaking. For individuals navigating these economic challenges, Singh recommends:
*Understanding personal budgets and financial ratios
*Acknowledging that the next 1-2 years will be financially difficult
*Adjusting spending habits accordingly Exploring self-sufficiency through home gardening and reduced reliance on purchased goods
*Investigating alternative education and income opportunities through digital platforms

As South Africa moves forward with Budget 2025, the question remains whether its leadership will address the underlying issues that have led to the current economic situation or continue to rely on consumers to bear the burden of systemic failures.