In the 2025 Budget Speech delivered by Finance Minister Enoch Godongwana on May 21, 2025, the South African government outlined a fiscal framework designed to navigate economic challenges while fostering growth. Amid a revised downward GDP projection of 1.4% for 2025 – lower than the initial 1.9% estimate from March – the speech emphasised macroeconomic stability, structural reforms, state capability enhancements, and accelerated infrastructure investment as pillars for inclusive growth. These elements create a backdrop for investments, particularly in private sector involvement and infrastructure, though direct references to early-stage and entrepreneurial funding were notably limited.
The speech’s economic context highlights the urgency of investment-driven growth. Global growth is forecasted at a subdued 2.8%, impacted by trade tensions and geopolitical risks, which affect South Africa as a small, open economy reliant on trade and financial inflows. Domestically, risks such as logistics bottlenecks and elevated borrowing costs underscore the need for strategic investments to boost productivity and job creation. The budget aimed to stabilise debt at 77.4% of GDP by 2025/26, achieve a primary surplus rising to 2.1% of GDP by 2027/28, and redirect spending from consumption to investment, with non-interest expenditure growing at 5.4% annually over three years. This redistributive approach allocates 61 cents of every rand to the social wage, while committing over R1 trillion to infrastructure, signalling a push for long-term economic resilience.
On early-stage investments, the speech provided scant direct details, reflecting a broader focus on established sectors rather than nascent ventures. No specific allocations, tax incentives, or programs were announced for seed funding or startup ecosystems. However, indirect support emerges through the second phase of Operation Vulindlela, which targets digital transformation and local government improvements to remove development barriers. These reforms could benefit early-stage businesses by streamlining regulations and enhancing access to markets, though the absence of targeted measures suggests that early-stage funding remains reliant on existing mechanisms like the Small Enterprise Finance Agency (SEFA) or private venture capital, not bolstered anew in this budget.
Entrepreneurial investments similarly received limited explicit attention. The minister did not outline new grants, incubators, or skills programs tailored to entrepreneurs. Instead, entrepreneurial growth is implied within the growth strategy’s emphasis on job creation and inclusive development. For instance, addressing spatial inequality through housing policy changes and land release could enable entrepreneurial activities in underserved areas, such as small-scale farming or community enterprises. The budget’s commitment to macroeconomic stability – promoting low inflation and interest rates – creates a conducive environment for entrepreneurial risk-taking, as lower borrowing costs could ease access to credit for startups. Yet, without dedicated funding, entrepreneurs may need to leverage private sector opportunities or existing tax reliefs, like the venture capital company regime under Section 12J, which was not expanded here*.
Private sector investments were more prominently featured in 2025, with a clear call for increased participation to supplement public resources. The speech highlighted reforms to public-private partnerships (PPPs), including newly gazetted regulations effective from the following month, aimed at simplifying processes and boosting deal flow. Frameworks for unsolicited proposals and managing fiscal commitments will be published, encouraging private involvement in key projects. The Department of Transport and Transnet’s private sector unit are actively engaging markets, with requests for information issued for rail lines (ore, chrome, coal, manganese) and a rolling stock leasing company. The Budget Facility for Infrastructure (BFI) has unlocked R52.9 billion in additional funding by assessing project viability, now allowing quarterly submissions for agility. Alternative financing from pension funds, banks, and international institutions is being explored, aligning with the minister’s view that “reforms will facilitate greater private sector participation in public infrastructure.” This could crowd in private capital for high-return ventures, indirectly supporting entrepreneurial ecosystems through supply chain opportunities.
Infrastructure investments emerged as the speech’s cornerstone, with over R1 trillion allocated over the medium term to expand productive capacity, create jobs, and improve services. Priorities include transport and logistics (R402 billion), energy (R219.2 billion), and water and sanitation (R156.3 billion). Specifics encompass R93.1 billion to the South African National Roads Agency (SANRAL) for 24,000 km of road maintenance, R53.1 billion for provincial roads, and R66.3 billion to the Passenger Rail Agency of South Africa (PRASA), including R18.2 billion for rolling stock and R12.3 billion for signalling. Energy investments focus on renewables and grid expansion to end loadshedding, while water projects involve dams and bulk infrastructure for industrial and agricultural needs. Maintenance is prioritised to ensure asset reliability, with the minister noting that “quality infrastructure investment expands the productive capacity of the economy and responds to the diverse needs of the citizens. Infrastructure is also a rich source of jobs.” Unfunded pressures, like Transnet’s debt refinancing, may require government guarantees, but the overall shift boosts capital payments growth.
In conclusion, the 2025 Budget Speech positions infrastructure and private sector collaboration as engines for recovery, with R6.69 trillion in non-interest spending over the medium term, including R180.1 billion in additions. While early-stage and entrepreneurial investments lack direct boosts, the framework’s stability and reforms could indirectly nurture them. This approach, amid fiscal prudence, aims to reverse economic stagnation, but success hinges on execution and private buy-in. As Godongwana stressed, faster growth must be a “national obsession” to build a prosperous South Africa. The call to private capital to support investment-driven growth or fixed investment is important. In the absence of the government, its private capital (dominated by pension funds) that needs to come to the fore. This is not unique to South Africa. What is unique is that we only investment approximately 3% of our private capital in private investments, which compares to in excess of 20% globally. Some definite room for improvement!
ENDS
* The benefits under Section 12J of the South African Income Tax Act, which provided tax deductions for investments in approved Venture Capital Companies (VCCs), ended on 30 June 2021 due to a built-in sunset clause. The regime was not extended beyond this date, as confirmed in the 2021 National Budget, marking the last opportunity for new investments to qualify for the incentive. Existing investments made before the deadline remain unaffected and continue to benefit from the rules as long as they meet holding requirements, such as the five-year period for permanent deductions.
