JERAHUNI ACCOUNTING & ADVISORY CONSULTANCY SPECIAL EDITION NEWSLETTER

The 2025 Budget Speech by Finance Minister Enoch Godongwana has set the tone for South Africa’s economic trajectory. It presents both opportunities and challenges for SMEs, NGOs, and large businesses. Here, we unpack the key takeaways and strategies to navigate the evolving economic landscape.

MACROECONOMIC OVERVIEW

• GDP Growth Projections: South Africa's economy grew by 0.6% in 2024, with an expected average growth rate of 1.8% over the medium term.
• Debt Stabilization: Government debt is projected to stabilize at 76.2% of GDP by 2025/26, with a budget deficit narrowing to 3.5% by 2027/28.
• VAT Increase: VAT will increase by 0.5 percentage points in 2025/26 and again in 2026/27, reaching 16%.
• Infrastructure Investment: Over R1 trillion will be allocated over three years, focusing on transport, energy, and water infrastructure.

IMPACT ON SMEs

Opportunities

1. Infrastructure Investment: SMEs in construction, logistics, and energy can benefit from government contracts and supply chain opportunities.
2. Digital Expansion: The reduction in mobile data costs and improved digital access create opportunities for tech startups and e-commerce businesses.
3. Public-Private Partnerships (PPPs): The new PPP framework offers SMEs avenues to participate in government projects.

Challenges & Risks

1. VAT Increase: Higher VAT rates could squeeze consumer spending and increase operating costs.
2. Tax Compliance Pressure: SARS is ramping up tax enforcement, targeting non-compliant businesses.
3. Funding Constraints: Access to finance remains a challenge, with potential higher borrowing costs.

Risk Mitigation Strategies

• Optimize Tax Planning: SMEs should work with tax professionals to maximize allowable deductions and manage VAT changes effectively.
• Leverage Government Incentives: Take advantage of grants, PPP opportunities, and digital adoption schemes.
• Improve Cash Flow Management: Reduce reliance on debt and negotiate better supplier terms.

IMPACT ON NGOs

Opportunities

1. Social Grant Expansion: NGOs focused on poverty alleviation and social development may see increased funding opportunities.
2. Infrastructure Development: Projects related to water, sanitation, and education can create partnership opportunities.
3. Public Health Funding: Increased allocations to healthcare may benefit NGOs working in the sector.

Challenges & Risks

1. Donor Funding Pressures: Economic constraints may reduce corporate and individual donations.
2. Higher Operating Costs: Rising VAT and potential increases in service delivery costs can impact budgets.
3. Regulatory Scrutiny: NGOs must ensure compliance with stricter governance and financial reporting standards.

Risk Mitigation Strategies

• Diversify Funding Sources: Explore corporate partnerships, impact investing, and government grants.
• Enhance Financial Transparency: Strong financial controls will be key to securing and maintaining funding.
• Strengthen Advocacy Efforts: Engage policymakers to ensure continued support for social initiatives.

IMPACT ON LARGE BUSINESSES

Opportunities

1. Infrastructure Expansion: Large businesses in transport, energy, and telecommunications stand to gain from infrastructure spending.
2. Tax Enforcement Reforms: A more efficient SARS could level the playing field by reducing tax evasion among competitors.
3. Public Sector Reforms: Operational improvements in government may enhance service delivery and investment conditions.

Challenges & Risks

1. Corporate Tax Pressures: While corporate tax rates remain unchanged, enforcement efforts may increase compliance costs.
2. Rising Costs: Higher VAT and wage bill pressures may impact profitability.
3. Regulatory Changes: Reforms in logistics, energy, and water may require operational adjustments.

Risk Mitigation Strategies

• Strategic Tax Planning: Ensure compliance while leveraging available tax incentives.
• Investment in Efficiency: Optimize operations to mitigate rising input costs.
• Policy Engagement: Work with industry bodies to navigate regulatory changes.

CONCLUSION

The 2025 Budget Speech sets the stage for both challenges and opportunities. Businesses and NGOs must proactively adapt to the new fiscal landscape by leveraging growth opportunities while mitigating risks. Jerahuni Accounting & Advisory Consultancy is committed to helping clients navigate these changes with strategic insights and financial expertise. Contact us today for tailored solutions to optimize your financial position in the evolving economic environment. For consultations and inquiries, reach out to us at:📧 info@jaac.coza |

 📞 +27 68 589 7848

Jerahuni Accounting & Advisory Consultancy – Your Partner in Growth