Economists have slammed Finance Minister Enoch Godongwana’s projection that the domestic economy would this year grow by 1.9% as baseless.
Their criticism comes after the GDP grew by a mute 0.6% in 2024 and 0.7% in 2023. They said it would be difficult for the economic growth to leapfrog to 1.9% in such a short space of time.
Godongwana, when delivering the 2025 Budget Speech, said the economy would grow by 1.9% and experience an average growth rate of 1.8% over the next three financial years.
Independent economist Mandla Maleka said it was impossible for the economy to grow by 1.9%, especially considering the proposed value-added tax (VAT) increase and low interest rate decrease environment.
“For the current financial year, we shouldn’t even see a more than 1% economic growth rate. There’s no way you can increase taxes — taking away money from consumption expenditure — and grow,” said Maleka, adding that increasing VAT made the cost of living higher.
In the speech, Godongwana proposed a VAT increase of 50 basis points in the 2025/2026 financial year and an additional 50 basis points in the 2026/2027.
“GDP is calculated by income, production, and consumption. If you apply all three methods of calculating GDP, you will scarcely find an element justifying where this 1.9% growth is going to come from,” he said.
Another economist, Duma Gqubule, was also gobsmacked on how the national Treasury arrived at 1.9%.
“It’s almost like they are praying and wishing that we get to 1.9%, and this is not based on anything concrete.”
Meanwhile, Maleka added that the 2025 budget was not geared towards improving the country’s economic fortunes and reducing the high unemployment rate.
He believes the government should zoom into expenditure and cut down wastage in order to create jobs.
“Government expenditure is running away without accountability, whether it is education, health, or other departments.
“To maximise revenue, you need to cut spending where you don’t need it. The government needs an office that will be solely focused on cutting expenditure.
“We can’t have teachers, nurses, and medical doctors who are unemployed. We need to spend wisely to unearth new money to fund the priorities we meet. You can’t tell me that a R2.2-trillion budget can’t feed 60-million people.”
He argued that the government was spending more on police and correctional services, but crime was not being reduced.
“In addition, we produce more matriculants, but there is a reduction of those with STEM [science, technology, engineering, and mathematics] subjects.
“This means we have a reduced number of individuals who could propel us into the age of artificial intelligence.”
Maleka said the biggest problem with the South African economy is having 28 million people on social grants.
Gqubule said 85% of public servant workers were from police, correctional services and justice system, and education.
“Yes, we must reduce waste, but there is no way that the public sector as a whole is bloated.”
He said, according to the Organisation for Economic Co-operation and Development, South Africa needs 150 000 doctors.
