Latest news with #Budget3.0
IOL News
3 days ago
- Business
- IOL News
Construction industry sees green shoots of growth off a low base - BER's Lemboe
South Africa's construction sector, long mired in stagnation and underperformance, is beginning to show green shoots of recovery off a low base, South Africa's construction sector, long mired in stagnation and underperformance, is beginning to show green shoots of recovery off a low base, according to Craig Lemboe, the deputy director at the Bureau for economic Research (BER) speaking at Construction Industry Business Breakfast held on Wednesday. While the industry remains well below pre-pandemic output levels and continues to suffer from weak capital investment and low business confidence, recent survey data suggests that "green shoots" may be taking root. Lemboe said for most of last year, saw the non residential sector was starting to show a little bit more growth and more potential than the residential sector. However, this was from a more eroded base as it's 50% smaller than what than what it was 10 years ago. "We also see from our civil contractors survey that activity, particularly among large contractors, is doing quite well. So there is this idea that we are starting to see some larger infrastructure projects to come on board, and that the contractors are starting to see this, both in terms of the current activity, but also in terms of the activity going forward," he said. South Africa was starting to see some larger infrastructure projects to come on board. Despite these promising indicators, Lemboe cautioned that systemic barriers persist. Long delays in municipal approvals, chronic late payments by public entities, and uncertainty around infrastructure funding continue to hamper sustained recovery. The Western Cape province stood out as a bright spot, with above-average construction activity and stronger investor sentiment. Still, nationally, overall building sector confidence remains low, with 75% of residential builders expressing dissatisfaction with prevailing conditions. Another positive to support growth ahead, was the Budget 3.0 announcement of R1.03 billion allocated for infrastructure. However, Lemboe said while it "is a welcome announcement, there are a number of caveats that we are very weary of at the BER." A large chunk of this spend is being filtered through state-owned enterprises, but there isn't a lot of clarity on where the income is going to come from, where the capital is going to come from, in order to find these projects. Also a portion of the funds comes through provinces and municipalities, and municipalities are known to be weak on capital expenditure. Ramokgopa Meanwhile, Minister in the Presidency for Planning, Monitoring and Evaluation, Maropene Ramokgopa, also speaking at the event, said South Africa is accelerating plans to transform the country into a "construction site" through a sweeping infrastructure drive that aims to tackle unemployment, stimulate inclusive growth, and reduce the high cost of living, . Ramokgopa pointed to the government's Medium-Term Development Plan (MTDP) for 2024–2029, which commits to deliver n the established investment pipeline. "Increasing public infrastructure spending requires stimulating private sector investment that will enable industrialisation and supporting job creating in the country," she said. The government has committed over R943.8 billion to public infrastructure over the medium term, with a strong emphasis on crowding in private investment through public-private partnerships. However, public infrastructure spending currently accounts for just 3.8% of GDP, well below the 10% target set. Ramokgopa said South Africa's national development was linked to that of the African continent. "Infrastructure must drive regional integration, promote and support industrialisation across Africa as a region. We are advancing collaboration and partnership in accelerating regional infrastructure projects through an African Union's presidential infrastructure champion initiative," she said BUSINESS REPORT
IOL News
5 days ago
- Business
- IOL News
A Tale of Two Forces: Fiscal vs Monetary Policy tug-of-war
The fuel levy makes up approximately 6% of the government's total revenue and is the fourth-largest revenue-generating item in the government budget, collecting R730 billion over the past decade. Image: File 'It was the best of days; it was the worst of days.' In recent weeks, South Africa has dominated international news concerning its US-South Africa relations, which nearly overshadowed the outcomes of Budget 3.0 delivered by Finance Minister Enoch Godongwana on May 21, 2025. The VAT increase proposed in Budget 2.0 was revoked and replaced with a fuel levy increase of 16 cents per litre for petrol and 15 cents for diesel. Although considered a necessary evil, the fuel levy increase affects the economy and households similarly to the scrapped VAT increase. This levy follows a 12.74% rise in electricity prices effective from April 1 and precedes a 25 basis-point repo rate cut on the 29th of May 2025, reducing the prime lending rate to 10.75%. Much appears to be occurring simultaneously or in brief bursts, affecting various economic agents in different ways. South Africa is a fuel-importing nation, relying on nearly 80% of its crude oil on imports, which constitutes a substantial part of the country's import bill. Although fuel prices are regulated in South Africa, they remain influenced by market forces, such as the exchange rate and the dollar oil price. While managing fluctuations in international fuel prices is beyond our fiscal control, levies and fees fall within our remit. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ According to the Organisation Undoing Tax Abuse (OUTA), from 2009 to 2014, South Africa's Basic Fuel Price (BFP) was the largest component of domestic fuel prices, ranging between 51% and 58% before decreasing to 30% in 2020. However, taxes and levies have been increasing, accounting for almost 70% of the fuel price in 2020. The fuel levy makes up approximately 6% of the government's total revenue and is the fourth-largest revenue-generating item in the government budget, collecting R730 billion over the past decade. Although it is not the biggest source of government revenue, it generates more revenue than customs duties or alcohol and tobacco excise duties, which should have been the sacrificial lamb protecting the local market. As reported by the Department of Mineral Resources and Energy (DMRE), in December 2021, the price of inland 95-octane petrol stood at R20.29, comprising a basic fuel price of R9.74 (48%), taxes and levies of R6.67 (33%), retail and wholesale margins of R2.74 (14%), and storage and distribution costs of R1.14 (6%). The Road Accident Fund levy of R2.18 (1%) was not included. South Africa's fuel prices are heavily influenced by levies and taxes rather than by global market fluctuations. According to the Stats SA 2021 report, there are 13 different charges depending on the type of fuel and one's place of residence. Are we undermining our economy by self-sabotaging? The South African Petroleum Industry Association (Sapia) reports that fuel prices rose by 21% in 2017/2018, leading to cost-push inflation and economic growth falling below 1%. This latest levy increase is likely to have a similar impact in an already frail economic environment. Higher electricity and fuel prices raise production and operational costs, leading to a decrease in aggregate supply, as businesses rely on the transportation of goods for production and retail purposes. This ultimately results in lower output, which, in turn, affects employment, wages, and investment as firms implement cost-containment measures to remain productive. As businesses pass the burden onto consumers by charging higher prices for their products and services, this leads to cost-push inflation pressures that alter spending behaviour, as consumers make trade-offs between food, repaying debt, electricity, commutes, and other essential household expenses. Consequently, aggregate demand in the economy will dampen as disposable income is eroded, thereby hindering economic growth. Although businesses and consumers were cushioned by the R1.27 drop in the basic fuel price shortly after the increase in the fuel levy, in the long term, the higher levy undermines South Africa's economic growth. An additional financial relief for consumers was a 0.25% reduction in the prime rate from 11% to 10.75%. Although this interest rate reprieve was moderately welcomed by South Africans, if higher fuel levies drive inflation, the South African Reserve Bank (SARB) may hesitate to cut rates further, limiting growth stimulus. Additionally, a fuel levy hike raises costs immediately, while rate cuts have a lag effect, thus taking time to stimulate growth. Rate cuts benefit indebted middle-class borrowers, boost borrowing, encourage business expansion, and stimulate economic activity, but do not offset fuel inflation for the poor. The fuel levy increase risks hurting short-term growth and rising inequality, disproportionately affecting low-income earners and households. These two policy decisions have opposite impacts. The fuel levy hike increases inflation, thereby reducing economic activity, while an interest rate cut spurs growth. To counter this challenging balancing act, the economy must grow at a higher rate to increase tax revenues and productive government spending. A higher growth rate will create jobs, reducing the number of economically inactive workers who rely on social grants as they shift to personal taxpayers. Growth also signifies positive business performance. This will broaden the tax base as more individuals gain employment, diverting the government's spending from social grants to more growth-enhancing initiatives. Moreover, corporate taxes will also increase. Very little can be accomplished with the low growth rate of 0.6% recorded in 2024 and 0.1% during the first quarter of 2025. If growth continues on this downward trajectory, government revenue and public expenditure will remain constrained.
eNCA
11-06-2025
- Business
- eNCA
Fiscal framework and revenue proposals scrutinised by NA and NCOP
PARLIAMENT - Budget 3.0 looks set to pass through parliament. MPs from the National Assembly and the National Council of Provinces voted in favour of the 2025 Fiscal Frameworks and Revenue Proposals on Wednesday. READ: Budget 3.0 | Fiscal framework up for debate These outline economic policy and must be passed before any budget bills. The first budget speech was not presented by the minister following an uproar in cabinet about a planned 2% VAT Hike. The second budget presented a more moderate VAT hike but members of the GNU voted against it. Senior research associate from the Southern Africa Labour and Development Research Unit, Andrew Donaldson unpacked the new budget with eNCA.
Daily Maverick
09-06-2025
- Business
- Daily Maverick
South Africa's SMMEs are flying blind in a changing global order
Small businesses are yet again expected to absorb the shocks of stalling growth, economic policy and diplomacy. Small businesses are expected to keep the lights on, even as South Africa stumbles through an increasingly volatile global and domestic economic environment. While a 25 basis point rate cut at month end offered some respite, it's hardly the lifeline small, medium and micro enterprises (SMMEs) need, said Miguel da Silva, executive of business banking at TymeBank in the bank's SMME forecast for June. 'Some diminishing pressure on the cost of credit' followed the South African Reserve Bank's cut, Da Silva said. Yet, he said 'the economy needs every bit of help it can get'. VAT relief with a fuel levy sting The National Treasury's decision to hold VAT steady at 15% provided some short-term relief to cash-strapped SMMEs. But the olive branch came with a thorn. As of 4 June, petrol and diesel prices jumped by 16c and 15c per litre respectively. 'With many small businesses already operating on razor-thin margins, this 16c increase will likely be passed on to consumers, potentially dampening demand in an already constrained market,' Da Silva said. This adaptation to the Budget showcases the government's strained fiscal position. In a podcast discussion on Budget 3.0, Stanlib chief economist Kevin Lings pointed out that until South Africa lifts GDP growth above 3%, pressure on public finances will persist. 'The negative revenue impact from backtracking on the VAT increases proposed in the previous version of the Budget, as well as the weaker economic growth trajectory, is counteracted… by a combination of revenue and spending adjustments,' explained Dr Elna Moolman, Standard Bank Group head of South African macroeconomic research. 'The expenditure changes are dominated by scaling back some of the new spending proposed in the previous versions of the Budget, while the revenue adjustments include both the reversal of some of the tax relief previously proposed… and unspecified future tax hikes.' The Budget foreshadows a pivot to removing the regulatory burden on businesses. Though, as Da Silva noted, no specific SME-support programmes, funding initiatives or targeted relief measures have emerged. Q1 data highlights on the scale of struggle The economic scoreboard from Q1 depicts an economy in stagnation: GDP grew by just 0.1% in Q1 2025, with agriculture (+15.8%) the only area showing growth. The National Treasury revised 2025 growth expectations downward from 1.6%, from 1.8%. Official unemployment rose to 32.9%, from 31.9%, which translates to a decrease of 54,000 in the labour force. Youth unemployment increased to 46.1% from 44.6% in the first quarter of 2024. While the SME SA Funding Summit 2025 on Thursday, 12 June is expected to explore access to finance, Da Silva stressed that a functioning, reliable environment matters more. How does this affect you? No real relief for entrepreneurs: if you're running a small business, don't hold your breath for targeted funding or tax breaks. Government promises of support remain vague. Price volatility on imports and exports: If Agoa collapses or BRICS moves away from the dollar, expect price changes in imported goods and export delays. Policy fog = business risk: If you're a customer, supplier or entrepreneur, inconsistent policy and mixed messages from government and diplomats create risk, which translates into cautious spending, higher borrowing costs and business hesitancy. Agoa and the diplomatic see-saw South Africa's trade diplomacy with the US remains complicated, but functional for now. Trade Minister Parks Tau and Agriculture Minister John Steenhuisen delivered a new framework to US Trade Representative Jamieson Greer on 19 May, laying out a new bilateral trade proposal. 'We met and had a very cordial and constructive meeting with Ambassador Greer… We had a very open and frank exchange about how we can ensure mutually beneficial trade between South Africa and the United States of America,' said Steenhuisen. He further noted that 'the importance of both markets for each other, and obviously a lot of emphasis from the American side [on] wanting to rebalance some of the trade… and from our side, wanting to retain market access'. With Agoa set to expire in September 2025, a renewal is looking uncertain. Da Silva said that 'the complex challenge of either finding alternative markets or restructuring their operations' looms large for SMME suppliers in US markets. 'While the US is not our largest trading partner, it is an important one, with 8% of our exports destined for its shores,' said Maarten Ackerman, chief economist at Citadel. 'Of that 8%, a third is excluded from tariffs, but citrus exporters are likely to be hardest hit.' BRICS Summit brings new questions Then there's the BRICS Summit in Brazil in early July, where stakeholders are expected to discuss mechanisms to alleviate dependency on the dollar. 'For SMEs, particularly those in export-oriented sectors, this diplomatic tightrope walk translates into very real business planning challenges,' Da Silva explained. Navigating dual allegiances between BRICS and the West 'requires SMEs to develop strategies that can withstand diplomatic volatility while capitalising on emerging opportunities', Da Silva said. DM
IOL News
08-06-2025
- Politics
- IOL News
The EFF's Political Strategy: Is it Time for a Change?
EFF leader Julius Malema engaging President Cyril Ramaphosa in a recent parliamentary debate. Is it advisable for the EFF to be fixated on micro issues or has the time come for the party to redirect its focus on macro politics?, asks the writer. Image: Phando Jikelo/Parliament of SA Prof. Bheki Mngomezulu ON 26 July 2013, the Economic Freedom Fighters (EFF) was established as a new political party. It promised to reshape South African politics by breathing life into parliament. This was not a voluntary decision. The party was formed following the expulsion of Julius Malema by the ANC and the subsequent exodus of other then and former ANC Youth League members who sympathized with Malema. Some of the youth who did not belong to any political party at the time saw the EFF as their political home thus giving hope about the future of this party. After the 2014 general election, the EFF emerged as one of the high performers with 25 seats in the National Assembly. It came third following the ANC and the DA which obtained 249 and 89 seats respectively. This enviable upward trajectory continued in the subsequent election in 2019 where the EFF obtained 44 seats. There was optimism that the party would continue to grow until the newly formed MKP emerged on 16 December 2023 and participated in the 2024 general election. The MKP caused an upset to the EFF which was moved to position four and to the ANC which was reduced to 159 seats or 40.18%. But one of the characteristic features of the EFF which gave it popularity was how it changed parliament through its radical stance. Soon after the EFF joined parliament, many South Africans got interested in following parliamentary proceedings. The EFF was also clear that it was going to ensure that politicians did not go to parliament to sleep. It kept its promise. Something unprecedented was when it confronted a sitting president directly and even flouted parliamentary rules. This is what happened with former President Jacob Zuma with its popular slogan 'pay back the money!' President Cyril Ramaphosa had a taste of the EFF's radical stance. Firstly, it blamed him for the Marikana massacre. Later, it took him head-on following the Phala Phala saga. Recently, the EFF was one of the political parties that successfully challenged the 2% VAT hike proposed by Minister of Finance Enoch Godongwana. Following the tabling of Budget 3.0 on 21 May 2025, the EFF approached the High Court challenging the increase of the petrol levy. Although the court dismissed the application, the EFF made its views public. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ While all these actions by the EFF should be understood in context, and while it is true that they have acted in this manner on behalf of the public, critical questions must be asked now, especially following the EFF's declined performance in the 2024 general election. Firstly, should the EFF change its tactics to rebrand itself? In life, there is no strategy that is good and effective for all times and situations. As times change, so should the strategies. With so many political parties emerging and the electorate having more options on election day, some political party strategies could easily be deemed obsolete. Secondly, is it advisable for the EFF to be fixated on micro issues or has the time come for the party to redirect its focus on macro politics? It is true that some micro issues still matter. But given what is happening in the geopolitics it would serve the EFF well to look at how it can contribute to the country's broad agenda of responding to these global issues. Thirdly, following the outcome of the 2024 general election, and given the mishaps in the current coalition government, is it still advisable for the EFF to take a firm stance that it will never work with the MKP with which it shares opposition benches? The DA swallowed its pride and is working with the ANC, which it had been publicly accusing of corruption, inefficiency, theft, and related matters. What would prevent the EFF from working with the MKP which is a new political party? Fourthly, as the EFF continues to lose some of its influential leaders such as Floyd Shivambu, Mzwanele Manyi, Dr Mbuyiseni Ndlozi, Adv. Dali Mpofu, and Adv. Busisiwe Mhkwebane, is it still wise to maintain a radical stance and refuse to work with like-minded political parties? Politics is a numbers game. When party support declines, and when votes go down, the party leadership must revisit its stance. The EFF can draw lessons from COPE which dropped from 30 seats to 3 seats, and then literally dissipated. Fifthly and lastly, should Malema change his leadership style? One of the concerns about the EFF in the public eye has been that his leadership style is making others uncomfortable, which results in other members leaving the organisation. Whether this accusation is true or not is neither here nor there. Perceptions matter in politics. If he were to change his leadership style, that would be good for his party. After all, Malema has done well with his leadership collective to grow the EFF to where it is today. It would be regrettable if he were to contribute to its untimely demise. The significant decline in ANC support coupled with the DA's dismal failure to capitalise on the ANC's mistakes means that chances of one political party winning with an outright majority are very slim at best and non-existent at worst. With the MKP coming into the picture and performing in the manner it did even the so-called 'tried and tested strategies' must be revisited to keep the party relevant, focused and growing. Any party which overlooks or disregards these facts would be doing so for its peril. I don't think that this is the route the EFF would like to go, especially after having worked so hard since its formation in 2013. In a nutshell, it is time for the EFF to grow. The party has made its presence felt in South African politics. It has taken bold decisions and left indelible footprints. But at times political strategies must be changed. This includes the tone, language, actions, focal points, and political alliances. * Prof. Bheki Mngomezulu is Director of the Centre for the Advancement of Non-Racialism and Democracy at Nelson Mandela University. ** The views expressed do not necessarily reflect the views of IOL, Independent Media or The African.
