Finance minister Enoch Godongwana admits in the latest iteration of his 2025 budget that South Africa is exposed to a volatile external environment as a result of trade tensions and tariffs announced by the President Donald Trump administration.
He tabled his budget on Wednesday for a historic third time in a calendar year.
The initial budget in February was postponed at the last minute amid objections to a proposed two percentage point increase in the VAT rate, while the second budget in March, which proposed a VAT increase over two years, was challenged in court.
Tabling the latest budget in a joint sitting of parliament on Wednesday, Godongwana tipped his hat to President Cyril Ramaphosa, who is on an official visit to Washington where he will meet Trump.
“Global trade is projected at 1.7% in 2025, which is lower than the January estimate. At the same time, inflation expectations are now above central bank targets in many advanced and emerging market economies. And new trade barriers may raise inflation and prolong the cycle of higher interest rates.”
Briefing journalists ahead of the tabling of the budget on Wednesday morning, Godongwana said there have been informal discussions between the South African government and the US Trump administration.
“There is a South African dimension which has two issues. The first is the trade component. The second is the political consideration, whether it is expropriation and whether Starlink is being discriminated against. But from a trade perspective, South Africa has been engaged like all other countries.”
An allocation of about R1bn is proposed to cover the losses from the US President's Emergency Plan for Aids Relief (Pepfar), which was discontinued by the Trump administration earlier this year.
Godongwana said South Africa was highly exposed to external volatility with the rapid intensification of trade tensions and elevated policy uncertainty weighing on the global outlook.
“In recent months, the announcement of large tariffs by the US, followed by a partial [or] temporary suspension of these measures, has triggered severe volatility in global markets, trade and growth projections.”
He said as of April, the International Monetary Fund projects global growth will fall from 3.3% in 2024 to 2.8% in 2025, recovering to 3% in 2026. The US economy is estimated to grow by 1.8% in 2025, 1.7% in 2026 and 2% in 2027.
“Growth in advanced economies is expected to slow to 1.4% in 2025, dragged down by a weaker outlook for the US. Growth in emerging markets and developing economies is expected to slow from 4.3% in 2024 to 3.7% in 2025, with the largest downward revisions for countries hardest hit by recent US trade actions — particularly China and Mexico.”
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