Godongwana announced that the country’s growth forecast has been revised down to 1,4% for 2025, from the 1,9% predicted earlier this year.
He said the weaker outlook was due to high interest rates, new global trade barriers, and ongoing problems within South Africa’s transport and logistics systems.
“The international environment remains fragile. New trade barriers and persistent inflation are threatening to extend the cycle of higher interest rates. These are worrying economic consequences,” Godongwana said.
He further mentioned in his speech that the International Monetary Fund had revised its global growth forecast downward to 2,8% for 2025, while global trade is expected to grow at just 1,7%. These developments, according to the minister, are already having a knock-on effect on South Africa’s economy.
Revised growth forecast signals tougher times ahead
Godongwana cited logistics constraints, global instability, and high borrowing costs as significant risks, projecting only marginal growth of 1,6% in 2026 and 1,8% in 2027.
Government debt is projected to stabilise at 77,4% of GDP in 2025/26, slightly higher than previously estimated. While the main budget deficit is expected to shrink by R8 billion over the Medium-Term Expenditure Framework, debt service costs will remain daunting at R1,2 billion per day.
“This level of debt servicing outpaces spending on essential services like health and education,” the minister said.
Fuel levy sparks backlash
Godongwana further mentioned, in a move to avoid a VAT increase, that the only new tax measure in the budget was an inflation-linked fuel levy increase taking effect on 4 June.
Petrol prices will rise by 16c per litre and diesel by 15c. He said that this is the first fuel levy increase in three years.
Industry leaders question government’s decision to increase the fuel levy, warning of its impact on transport costs and consumers. Gavin Kelly, CEO of the Road Freight Association, told Farmer’s Weekly that the hike will push up the cost of transport and hit consumers hard.
“Transporters cannot absorb increases without detrimental effects on their bottom line. This means transport through South Africa will become more expensive, and global supply chains may re-evaluate their routes. This is not a good decision, neither in the medium nor long term,” Kelly said.
Budget misses the mark
TLU SA’s general manager, Bennie van Zyl said that he is sceptical about the budget’s ability to deliver real change.
“Every government bears two responsibilities: to ensure citizen safety and to foster a business-friendly environment. The current administration continues to fall short,” Van Zyl said.
He mentioned the fuel levy, describing it as out of touch with the pressures that farmers face. He also pointed to the lack of clear, enforceable measures to address crime, tender fraud, and cadre deployment.
“Without law and order, no economy can be viable. Budget allocations mean nothing without effective implementation and accountability,” he said.
Mixed response from agriculture sector
Des Lesele, senior manager for agribusiness client value propositions at Nedbank, welcomed the scrapping of the VAT hike but warned of the impact of higher fuel prices.
“Farmers are already struggling with the cost squeeze on agricultural inputs. Higher fuel costs will affect transportation and production expenses, which could lead to increased prices for agricultural goods,” Lesele said.
However, he commended the R1 trillion infrastructure allocation over three years, particularly the focus on transport and logistics.
“This is expected to enhance productive capacity and benefit the agriculture sector by reducing transportation costs,” Lesele added.
