South Africa plans to invest over 1 trillion rand (54.5 billion USD) in infrastructure over the next three years to stimulate economic growth. The focus will be on transport, energy, and water sectors, with significant projects in development. Minister Enoch Godongwana emphasized the necessity of this investment amid low GDP growth and outlined proposed VAT increases to fund essential services.
On March 12, 2025, South Africa revealed a significant infrastructural spending plan, allocating over 1 trillion rand (approximately 54.5 billion U.S. dollars) over the next three years to stimulate economic growth. This announcement was made by Minister of Finance Enoch Godongwana during the 2025 budget review delivered to Parliament in the legislative capital, Cape Town.
The Minister emphasized that infrastructure development is fundamental to the government’s growth strategy, enhancing job creation and improving service delivery. He stated, “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.”
Funding will be focused on three critical 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 commitment of 100 billion rand by the South African National Roads Agency to maintain the national road network and 19.2 billion rand allocated to the Passenger Rail Agency for essential signaling enhancements.
Despite these efforts, Godongwana pointed out the stagnation of the South African economy over the past decade, with a GDP growth average of less than 2 percent, stating, “In 2024, the economy grew by only 0.6 percent.” Projections indicate that GDP growth may average 1.8 percent over the medium term from 2025 to 2027.
Regarding government spending, it is expected to rise from 2.4 trillion rand in 2024/25 to 2.83 trillion rand by 2027/28. The budget targets a primary surplus of 0.5 percent for 2024/25 and anticipates a narrowing budget deficit of 3.5 percent by 2027/28.
The proposal to increase the value-added tax (VAT) by 0.5 percentage points in both 2025/26 and 2026/27 is part of the government’s plan to address ongoing spending pressures. Godongwana noted this move would generate significant additional revenue, stating, “These measures will raise 28 billion rand in additional revenue in 2025/26 and 14.5 billion rand in 2026/27.”
Godongwana elaborated on the careful consideration that went into the decision to raise VAT, stating, “This decision was not made lightly. No minister of finance is ever happy to increase taxes.” He recognized the importance of balancing vital service delivery needs with economic growth requirements.
In summary, South Africa’s recent announcement of a 1 trillion rand infrastructure investment over the next three years represents a strategic effort to invigorate the stagnant economy. Minister Godongwana underscored the essential role of infrastructure in economic development and job creation while addressing the need for a balanced approach to tax increases to maintain essential services and foster growth. Overall, these plans are positioned as critical steps toward revitalizing the country’s economic landscape.
Original Source: english.news.cn
