After its unexpected postponement owing to disagreements between the partners in the Government of National Unity (GNU) last month, the 2025 Budget needs to reduce the policy and economic uncertainty in the country, Business Unity South Africa (Busa) says.

The organisation states that this needs to be done by showing that the GNU parties can manage their political differences and meaningfully cooperate in the interests of all South Africans.

The Budget, which is being tabled today, also needs to show that the GNU is committed to pragmatic programmes and policies that are focused on facilitating inclusive economic growth to sustainably reduce unemployment, poverty and inequality, Busa says.

The organisation also believes the Budget needs to show that the GNU is committed to responsible fiscal management, necessary to ensure that South Africa has the capacity – and will not need to depend on others – to cope with the present global political and economic upheaval.

“In a nutshell, South Africa needs a revenue strategy to reduce debt while supporting initiatives targeted at economic growth. This will require difficult trade-offs, which necessitate proper consultation and a constructive national conversation to agree on a path to higher levels of inclusive economic growth,” Busa says.

The organisation also recommends that, rather than resorting to tax increases, National Treasury focus on broadening the tax base and improving tax compliance. This can be done by strengthening the capacity of the South African Revenue Service (Sars) to improve tax compliance, enforce controls on illicit trade and improve efficiency in revenue collection.

“Tax hikes are not a viable solution, especially increases in value-added tax (VAT), personal income tax (PIT) or corporate income tax (CIT). South Africa’s already narrow tax base cannot bear further burdens, and tax increases will stifle economic growth.

“Increases in PIT – and other fees and levies – will weaken consumer spending, reduce household disposable income and erode investor confidence. International experience has shown that annual net wealth taxes often do not result in significant additional revenues, while the costs of compliance and administration are high, as avoidance and evasion become commonplace,” Busa says.

The organisation claims that there are also significant challenges with valuing some classes of assets.

“The Davis Tax Committee warned of these challenges and recommended that information on the market value of assets be gathered by Sars to assist with a future decision about a wealth tax. This only commenced in the 2023 filing season.

“It is doubtful that sufficient analysis of this information could have been undertaken to properly inform a decision about a wealth tax at this stage. Rather than imposing an additional tax burden, the focus should be on fostering an environment conducive to business growth and attracting investments,” the organisation says.

Busa points out that South Africa is a savings-scarce country, which needs to attract capital for financing infrastructure and development, noting that any tax policy considerations must strike a balance between current revenue needs and future government spending.

“Taking on more debt is not advised, as South Africa's rising debt costs and budget deficits continue to pose significant challenges. Business continues to call for the introduction of an effective, robust fiscal rule, which will serve as an anchor to ensure compliance and accountability in government spending.

“Maintaining strict fiscal discipline during this period of global uncertainty is going to be important to protect South Africa’s fiscal sustainability,” Busa says.

The organisation calls for a strategic approach to identify savings, eliminate inefficiencies and address wasteful expenditure.

“This needs to be done through a considered review of programmes that can be eliminated and the State assets that can be sold. Widespread shaving of spending is no longer enough and wasteful and unproductive spending needs to be eliminated wholesale.

“Spending must be redirected to key priorities that support a pro-growth agenda and support necessary increases in education, healthcare and infrastructure,” Busa says, adding that, ultimately, government spending needs to deliver measurable economic benefits that bolster growth.