Maarten Ackerman, Chief Economist at Citadel

Finance Minister, Enoch Godongwana will deliver South Africa’s 2025 National Budget Speech on 19 February 2025 against the backdrop of persistent economic challenges and a constrained fiscal environment. Maarten Ackerman, Chief Economist at Citadel shares his key expectations for the budget and its potential impact on economic growth, fiscal sustainability, and investor confidence.

Balancing growth and fiscal sustainability 

Despite the initial optimism following the formation of the Government of National Unity (GNU), South Africa’s economy remains constrained. “The key theme for this year’s budget will likely be balancing expenditure and revenue in a low-growth environment, without the ability to significantly raise taxes or increase debt,” says Ackerman.

A major focus will be fiscal consolidation, ensuring that our debt to Gross Domestic Product (GDP) levels stabilise over the next three years while managing expenses such as the public sector wage bill. Government must tread a fine line between maintaining essential spending and avoiding excessive reliance on borrowing.

Driving economic recovery and investor confidence 

While the budget is not only focused on economic reform announcements, it can support growth by removing red tape and accelerating the implementation of existing policies. Ackerman emphasises that fast-tracking structural reforms, particularly in energy, transport and manufacturing will be critical to boosting business confidence and attracting global investment.

“The policy framework is in place; what’s needed now is decisive implementation. Streamlining regulations for private sector participation in infrastructure, easing licensing constraints, and providing targeted tax incentives will encourage investment and improve long-term economic stability,” he adds.

Taxation and revenue strategies

Given South Africa’s already high tax burden, significant tax hikes are unlikely. However, the government may explore alternative revenue measures, such as adjusting Value-Added Tax (VAT) structures or revising tax policies affecting high-net-worth individuals. Ackerman highlights that this might include potential changes around Regulation 28, capital gains tax, and dividend tax as key areas to watch.

“With limited fiscal flexibility, this budget must focus on efficiency and curbing unnecessary expenditure while fostering an environment that supports sustainable economic growth,” Ackerman concludes.

ENDS