South Africa plans to invest over 1 trillion rand (54.5 billion USD) in public infrastructure over the next three years, as announced by Finance Minister Enoch Godongwana. The budget focuses on transport, energy, and water improvements, aiming to stimulate economic growth. Growth has stagnated, prompting this significant investment and a proposed VAT increase to generate required revenue for essential services.
On March 12, 2025, South Africa announced a substantial three-year plan to invest over 1 trillion rand, approximately 54.5 billion US dollars, in public infrastructure to stimulate economic growth. This announcement was made by Finance Minister Enoch Godongwana during his budget speech to Parliament in Cape Town, which outlined the government’s key spending priorities after a three-week delay due to internal disputes over a VAT increase.
Minister Godongwana emphasized the critical role that infrastructure plays in the growth strategy of the nation, describing it as a foundational element of economic development and a major driver of job creation. He remarked, “Infrastructure is a key pillar of our growth strategy. It is the bedrock of economic development, a key source of jobs, and an avenue to scale up service delivery.”
The government plans to allocate funds across three primary sectors: 402 billion rand for transport and logistics, 219.2 billion rand for energy infrastructure, and 156.3 billion rand for water and sanitation. Key projects include a 100 billion rand investment in the national road network by the South African National Roads Agency and 19.2 billion rand for essential railway signaling upgrades.
The Minister also addressed the stagnation of the South African economy, which has seen GDP growth average less than 2 percent over the past decade, with only 0.6 percent growth recorded in 2024. The projected average GDP growth is expected to be 1.8 percent from 2025 to 2027. Consolidated government spending, excluding interest payments, is slated to increase from 2.4 trillion rand in 2024/25 to 2.83 trillion rand in 2027/28.
While a primary budget surplus of 0.5 percent of GDP is anticipated for 2024/25, the government aims to stabilize its debt at 76.2 percent of GDP by 2025/26. Furthermore, the budget deficit is expected to narrow to 3.5 percent by 2027/28. Godongwana proposed a marginal increase in the VAT rate by 0.5 percentage points in both 2025/26 and 2026/27, raising it to 16 percent by the 2026/27 financial year to generate necessary revenue.
He noted that, while alternatives such as increasing corporate and personal income taxes were considered, they would yield less revenue and pose risks to investment and job creation. “This decision was not made lightly. No minister of finance is ever happy to increase taxes,” stated Godongwana. Nevertheless, he underscored the pressing need for funding in health, education, transport, and security sectors, reaffirming that these measures are essential to meet developmental goals that cannot be deferred further.
The South African government’s commitment to invest over 54 billion US dollars in public infrastructure over the next three years reflects a strategic move to drive economic growth and meet increasing demands. Despite concerns regarding a VAT increase, the Minister of Finance has balanced fiscal requirements with the necessity for improved service delivery. The successful execution of this plan may significantly impact job creation and economic development in South Africa.
Original Source: english.news.cn
