Issued by Ismail Joosub on behalf of the FW de Klerk Foundation on 21/05/2025

The FW de Klerk Foundation acknowledges the tabling of the third iteration of the 2025 Budget Speech by Finance Minister Enoch Godongwana. Following significant public and political backlash to the proposed VAT increase in March, this revised budget reflects a more measured approach. However, it is not without serious concerns.

The government’s debt-to-GDP ratio is now projected to peak at 77,4%, marking the highest it has been since 1994 and debt-service costs will consume R426,3 billion in 2025/26, equivalent to 22 cents of every tax rand. Put differently, this means that we are spending around R1,2 billion per day just to service our debt. This is an unsustainable pattern that robs future generations of resources for investment in education, employment and infrastructure.

While the Foundation welcomes the abandonment of the VAT increase and retention of social support grants, the underlying structural weaknesses remain. GDP growth has been revised downward from 1,9% to 1,4% for 2025 and Treasury has reduced its revenue forecast by R61,9 billion over the Medium-Term Expenditure Framework (“MTEF”). Without urgent reform, the tax base will continue to shrink relative to need.

The long-term sustainability of the social grant system also remains a growing concern. Unless these grants are linked to pathways for employment and supported by genuine economic growth, they risk becoming a permanent fiscal liability rather than a bridge to opportunity. Grants must uplift, not entrench dependency – especially in a context of shrinking revenue and persistent youth unemployment.

The R1 trillion infrastructure commitment and modest increases to education and health spending are positive, but they must be coupled with clear delivery mechanisms, private sector partnerships and efficiency reforms – particularly at local government level. Commitments to embed expenditure reviews, eliminate underperforming programmes and reform procurement must be enforced to reduce bureaucratic waste. Just as importantly, every effort must be made to prevent the mismanagement and corruption that continue to erode public trust and undermine service delivery.

Ismail Joosub, Manager of Constitutional Advancement, stated: “This budget is a short-term fix to a long-term crisis. A 16c fuel levy increase is not a growth strategy. If anything, it will raise transport and food costs. We need urgent labour market reform, energy security and skills investment if we are to address youth unemployment and revive economic inclusion.”

Christo van der Rheede, the Foundation’s Executive Director, added: “South Africa cannot afford to delay fiscal reform any longer. Debt must be contained through outcome-driven spending, while every rand raised must deliver tangible public value. We support the fiscal anchor discussion, but it must lead to binding, enforceable rules.”

The Foundation urges Parliament to engage the fiscal framework robustly and demands that government deliver on its promise of inclusive, job-creating growth.