Brina Biggs
South Africa’s debt-to-GDP ratio is projected to hit 74.7% in 2024/25, presenting a significant challenge in managing high debt levels. Stabilizing this ratio would be advantageous, as it is better than the expected 80% from rating agencies. The government is unlikely to increase tax revenues, so the upcoming budget is expected to maintain current rates for personal income tax, VAT, and corporate tax, while raising taxes on sugar, carbon, tobacco, and alcohol.
To drive revenue, organic economic growth is essential, which can be supported by improved business and investor confidence stemming from better economic conditions, lower inflation, and declining interest rates. The government’s focus on fiscal consolidation and spending cuts is expected to enhance this confidence. Economic growth is forecasted between 0.5% and 1.3% in 2025, reflecting ongoing challenges but also positive reforms. Success in large infrastructure projects like water security and port and freight transport could further boost confidence and move South Africa closer to investment grade status.
For average taxpayers, stable tax rates offer predictability, but fiscal slippage is eroding earnings as tax brackets fail to keep pace with inflation. This could leave households worse off despite potential salary raises, there is a hope this will be updated. Investments in infrastructure and local government reform aim to improve service delivery and quality of life, while initial steps toward National Health Insurance (NHI) could enhance healthcare access. However, managing debt and boosting investor confidence are crucial for long-term economic stability.
Lastly, we must hope that global uncertainties, including tariffs and political challenges, do not further jeopardise South Africa’s growth or debt-to-GDP ratio.
Brina Biggs, Senior Manager at Budget Insurance. She writes in her personal capacity
