South Africa plans to invest over 1 trillion rand (54.5 billion USD) in public infrastructure over three years to stimulate economic growth, as announced by Finance Minister Enoch Godongwana. Key investments will focus on transport, energy, and water sectors, alongside a proposed VAT increase to support funding needs.
South Africa has announced a significant initiative to invest over 1 trillion rand (approximately 54.5 billion U.S. dollars) in public infrastructure over the next three years, aiming to stimulate economic growth. The announcement was made by Minister of Finance Enoch Godongwana during his budget review presented to Parliament in Cape Town.
Minister Godongwana emphasized the critical role infrastructure plays in both economic development and job creation, stating, “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.” He highlighted that capital payment allocations are notably increasing within the budget for infrastructure.
Funding will focus on three primary sectors, with 402 billion rand allocated for transport and logistics, 219.2 billion rand for energy infrastructure, and 156.3 billion rand for water and sanitation. Key transport projects include the South African National Roads Agency’s allocation of 100 billion rand to maintain national roads and a provisional 19.2 billion rand for the Passenger Rail Agency for signaling upgrades.
Godongwana pointed out the stagnation of the South African economy, which has seen a GDP growth rate below 2 percent for over a decade. According to him, GDP growth was only 0.6 percent in 2024, with projections of an average of 1.8 percent for the medium term from 2025 to 2027. He noted a planned increase in consolidated government spending, emphasizing the need for infrastructure investment.
The proposed budget also includes a VAT increase of 0.5 percentage points for the next two years, bringing the VAT rate to 16 percent by the 2026/27 fiscal year, in light of persistent spending pressures in key sectors. The government anticipates this will generate significant additional revenue, with 28 billion rand in 2025/26 and 14.5 billion rand in the following year.
Furthermore, Godongwana indicated that the decision to raise VAT was taken after exploring alternative tax increases, which were estimated to generate less revenue and create risks for investment and job growth. He asserted, “This decision was not made lightly. No minister of finance is ever happy to increase taxes,” acknowledging the challenges of balancing tax increases against urgent service delivery needs.
In summary, South Africa is poised to invest over 1 trillion rand in public infrastructure over three years, focusing on transport, energy, and water sectors. Despite challenges such as stagnant economic growth and necessary tax increases, this strategic investment aims to bolster economic development and improve service delivery while generating additional revenue. The Minister of Finance has indicated the importance of infrastructure as foundational to the country’s growth and job creation efforts.
Original Source: english.news.cn
