Business sector and civil society groups have raised concerns over the impact that the value-added tax (VAT) increase will have on businesses and consumers following Finance Minister Enoch Gondongwana Budget speech.
Image: Armand Hough / Independent Newspapers
Khwezikazi Windvoel
The recent and ensuing developments in the Government of National Unity’s disagreement on its first ever Budget is a rare political moment.
Both the postponed sitting and the final presentation was a bit of ideological theatrics except the stakes are real.
At the heart of this disagreement standoff is the proposed VAT increase, but beyond the tax debate, there is a much bigger question: Are we funding the right kind of growth for South Africa?
As we agree broadly on the impact of taxes on the poor, we need to not eye-ball the real conversation that we should be having as South Africans, and that is about how we mobilise capital for meaningful economic transformation.
The Debates beyond Taxing the Poor
South Africa is increasingly seen as a country of potholes and water shortages, therefore sadly we are no strangers to the crumbling state of infrastructure. The roads that once fuelled our economy are now better suited for off-road adventures, and if you are lucky enough to have a regular supply of running water, consider it a blessing, and sadly not a right as obligated by our Constitution. The 2025 Budget does allocate over R1 trillion towards infrastructure over the next three years, but the real issue is whether this money is being deployed effectively. But investing in infrastructure is not just about patching things up. Fixing these is not just about improving service delivery, it is about ensuring that businesses can operate, goods can move, and people can get to work. It is about building back better.
The frequency of floods, droughts, and other climate-related disasters has made one thing clear: we cannot afford to simply replace what is broken. We need climate-resilient infrastructure, transport networks that can withstand extreme weather, water systems that are built for long-term sustainability, and urban planning that anticipates future challenges rather than reacting to them. The question is, does this Budget reflect that urgency? Sadly, the answer to this question is, “no”.
At the heart of South Africa’s economic struggles is an urgent and undeniable truth, we desperately need jobs. Unemployment remains at crisis levels, and without bold intervention, we risk entrenching economic exclusion for millions. Infrastructure investment should not just be about fixing broken systems, it should be about job creation at scale. A well-executed infrastructure drive, particularly in these priority sectors, has the potential to create thousands of jobs.
From engineers to construction workers to maintenance staff, these projects can stimulate local economies and provide much-needed employment. But to maximise this potential, we need stronger linkages between infrastructure spending and skills development programmes. Simply put, we must build with the future workforce in mind.
A Budget that Invests in Green Growth
For years, the conversation around the just transition has been framed as an environmental or social justice issue. But let us be clear, it is an economic growth strategy. Countries that invest in clean, sustainable industries today are the ones that will be leading the global economy tomorrow. South Africa has an opportunity to position itself as a leader in climate-resilient infrastructure and blended finance mechanisms that attract private capital to complement public funds. But we cannot finance the transition to a low carbon future with half-measures.
While the budget includes some positive steps, like expanding the Budget Facility for Infrastructure (BFI) and allowing greater private sector participation, we need bolder action. Carbon finance, green bonds, and sustainability-linked financing should be at the forefront of our economic strategy, ensuring that investments in transport, water, and energy are not just repairs, but future-proof solutions.
We Need Innovative Fiscal Measures to Finance Growth
Given the constraints on our national budget, we need to think creatively about how we finance growth. Traditional reliance on public spending alone will not be enough. This is where innovative financing mechanisms must play a bigger role. Public-Private Partnerships (PPPs) should be expanded beyond just large-scale infrastructure projects. Municipal-level financing mechanisms, such as impact bonds and local green funds, can help unlock capital for smaller, community-driven projects. Additionally, leveraging South Africa’s carbon market potential can create new revenue streams, allowing climate finance to bridge some of the gaps in public funding. Another opportunity lies in pension funds and sovereign wealth strategies.
Many global economies are redirecting pension fund investments into infrastructure, ensuring long-term returns while addressing critical development needs. South Africa should explore similar pathways, ensuring risk-sharing mechanisms that make such investments viable. A just transition is not just about emissions reduction; it is about building economic resilience. And economic resilience is not just about debt management; it is about growth and real, sustainable, inclusive growth. South Africa cannot afford another decade of underperformance. This Budget, adjusted though it may be, is not just a financial blueprint, but a test about building an economy that works for all, today and in the decades to come.
Khwezikazi Windvoel is a Municipal and Project Manager of Climate Finance and Innovation at the Presidential Climate Commission Secretariat/A
Image: Supplied
Khwezikazi Windvoel is a Municipal and Project Manager of Climate Finance and Innovation at the Presidential Climate Commission Secretariat
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