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The transport sector is more likely to not absorb but pass the increase in the fuel levy to consumers. This will affect commuters in taxis and buses, the prices of products and services, and households using automotive vehicles to go to work and support their lives. This is a problem and will contribute to the ever-rising cost of living instead of tackling it.

While the SACP welcomes the commitment to infrastructure development investment allocation, we caution against what happened in the previous years. Infrastructure investment allocations of billions of rands annually were announced during the budget speeches, but South Africa has seen no major state-led infrastructure comparable to infrastructure development towards the 2010 FIFA World Cup. There are many roads – regional, district and local – that leave much to be desired. In many areas, potholes are the order of the day.

The SACP reiterates its stance in relation to blended finance. This model involves investment “de-risking” beneficial to profit-driven finance capital. Experience from other jurisdictions warns that this is a high-cost, low-yield option for the public.

While presenting the budget on Wednesday, 21 May 2025 to Parliament in Cape Town, the Minister of Finance Enoch Godongwana argued that this was not an austerity budget. This is certainly a reaction to the long-standing, consistent working-class campaign driven by a number of working-class formations, including the SACP and the progressive trade union movement, against the neo-liberal policy of austerity. Over the years, the National Treasury has implemented austerity under the notion of fiscal consolidation, and the South African Reserve Bank has used hikes in interest rates under its narrow policy of inflation targeting.

Under these two approaches to fiscal and monetary policy, the economy continued to deindustrialise and unemployment rose to crisis-high levels, surpassing 20 per cent after the government imposed the neo-liberal policy called Growth, Employment and Redistribution (Gear) in 1996. The crisis of unemployment worsened as the economy continued to deindustrialise and fell into another economic crisis – stagnation. Inequality widened as the rich continued amassing socially produced wealth, and poverty remained extreme, making the poor remain poor.

Crime levels soared, and in an increasing number of communities and aspects of societal life, corrupt elements, criminal syndicates and mafias took control. Austerity has affected the capacity of the state to fight crime and corruption, to the extent that the state itself cannot offer certain services at particular times due to “safety concerns”. For example, it has become common in Greater Johannesburg Metro for residents to experience power outages because of cable or other electric components theft in the electricity distribution system, or because of an unidentified fault at this or that substation, but then be informed that the technical teams would not go there at night because of “safety concerns”. This leaves the affected residents without electricity at night and at times for days. It is a major crisis, given that, unlike residents, the state has Metro Police, the South African Police Service, Crime Intelligence, State Security and the National Defence Force. 

Residents, especially the majority, being the working class and lower sections of the middle strata, depend on the state for the provision of safety and security, and electricity, as well as other affected services, which the state frequently fails to provide because of “safety concerns”: the state failing to provide these services because of criminal, mafia and gang control while it should be the state in control. While still on this score, municipalities face major constraints because of the legacy of austerity, among others. In electricity provision, the National Treasury has a mandate to regulate levies by municipalities, but it has failed to perform this role effectively, contributing to the negative impact in associated service delivery.

But does the minister’s assertion that the budget he presented is not an austerity budget hold water? No. It does not. The budget includes austerity. To answer this question with data from the budget, it is important to appreciate that austerity, undertaken under the notion of fiscal consolidation, is not only about outright budget cuts but also includes negative or curtailed growth rates in budget allocations, with negative implications. We return to this question. 

In fact, the National Treasury released a discussion document, which, in the absence of effective working-class struggle, can institutionalise austerity through “fiscal anchors”, or numerical rules. The working class needs to unite to tackle austerity in all its manifestations and policy instruments. While asserting that this is not an austerity budget, the minister also argued that it is an expansionary financial policy. Is this true? The facts say no. 

There are at least three tenets of an expansionary financial policy. In no particular order, the first is growth in budget expansion to boost aggregate demand through goods and services, thus supporting their domestic production and associated employment. The minister contradicted this expansionary financial policy tenet when he insisted that this budget cuts additional spending. It is important to appreciate that the reduction in additional spending comes against years of austerity and its negative impact, including social and service delivery deficits. For example, too many people, especially in rural areas, still do not have access to water, public sector healthcare is struggling, and Home Affairs services are also struggling.

The second tenet of an expansionary financial policy is a reduction in taxes, for example, the pay-as-you-earn tax, boosting the beneficiaries of this tax reduction with additional income to support aggregate demand for goods and services and to support associated domestic employment. This is not the case in the budget that the minister delivered.

Further, an expansionary financial policy is not only limited to fiscal policy but also includes monetary policy, through reductions in interest rates to boost aggregate demand for goods and services and reduce the cost of borrowing to support aggregate demand in goods and services, their domestic production and employment. Instead, the Reserve Bank has used interest rate increases in its narrow policy of inflation targeting.

As it stands, the budget that the minister argued is expansionary not only curtails budget allocations affecting key areas of development and employment creation, but also includes negative average Medium-Term Expenditure Framework (MTEF) growth affecting similarly critical items for the three-year period, including the financial years 2025/26, 2026/27 and 2027/28. The average annual growth in expenditure is crucial in assessing the government’s priorities and its capacity to drive structural transformation, especially in areas key to pursuing shared, sustainable and balanced growth and ensuring delivery of services. In this regard, the SACP is deeply concerned about the following items in the budget.

Industrialisation and exports

The low average MTEF growth of 1.7 per cent in allocation to industrialisation and exports is grossly inadequate to reverse South Africa’s long-term de-industrialisation and to re-industrialise the economy. Manufacturing’s contribution to GDP and employment has declined over decades, weakening the country’s productive base. The limited average MTEF budgetary growth for industrialisation and exports indicates no significant shift in fiscal prioritisation towards industrial policy, value-added production or export diversification, which requires manufacturing expansion and diversification. It undermines commitments to structural economic transformation and employment creation. In this way, the budget fails to respond meaningfully to the imperative of re-industrialisation. Industrial policy needs much greater fiscal support to be effective in transforming the economy.

Innovation, science and technology

Modest allocation of R20.2 billion in 2025/26, with limited real growth, reflects a lack of serious commitment to long-term productive capacity. It is important to understand the link between innovation, science and technology on the one hand and industrialisation and exports on the other hand. Science and technology innovation, research and development have an important role to play towards industrialisation and exports, which the budget lacks the seriousness it deserves.

Agriculture and rural development

Agriculture expansion remains vital for food security, rural employment and land ownership transformation. The low average MTEF growth rate of 1.9 per cent is inconsistent with rural development objectives, especially considering increasing climate stress, input cost inflation and pressure on small-scale producers. This allocation falls far short of enabling sustainable agrarian transformation or revitalising rural economies.

Home Affairs

The -2.4 per cent per year budgetary contraction over the MTEF is clearly austerity budgeting. This will likely affect the quality and timeliness of services offered by the Department of Home Affairs. It also suggests a lack of investment in critical infrastructure and modernisation needed to improve the efficiency of this department. Austerity in Home Affairs reflects a regressive approach that prioritises deficit reduction over strengthening basic state capacity.

Public administration and fiscal affairs

This category supports the state’s own machinery, including Treasury, financial oversight and core administrative functions. The relatively low average MTEF growth in this area implies continued erosion of state capability, especially in monitoring, enforcement and service delivery coordination. This contradicts the commitment to state transformation towards a capable developmental state with its own, internal capacity to serve the nation, of which the working class and poor are the overwhelming majority. 

Critical political economy perspective and Social Relief of Distress Grant in overall terms

The MTEF reflects a fiscally conservative orientation, prioritising debt stabilisation over developmental spending. While the social wage – health, education and social grants – receives the bulk of funding, this comes after years of austerity and therefore remains insufficient in many respects to improve the quality of education and healthcare for all.

It is also important to note that the much-needed implementation of the National Health Insurance to ensure quality healthcare for all is part and parcel of additional spending and requires adequate resourcing. The SACP reaffirms its call for the adequate resourcing and decisive implementation of the National Health Insurance.

Similarly, the Social Relief of Distress (SRD) Grant must be transformed into a universal basic income grant, rather than the DA-influenced approach proposed by the minister, which blurs the line between considering a work-seekers grant and a mere extension of the SRD Grant until the end of March 2026. While its extension to the end of March 2026 is crucial, the SRD Grant will have to be extended again and expanded to cover more beneficiaries amid the high unemployment and poverty rates and the stagnation that stands to more likely continue under the budget that the minister presented. The SACP reaffirms its call for the extension of the SRD Grant to serve as a step towards a universal basic income grant and for the grant to be improved.

Overall assessment and public employment programmes 

The SACP reiterates its call for an annual wealth tax, tighter regulation of the capital account, a capital transactions tax, and decisive measures to combat illicit financial transactions, illicit financial flows and profit shifting.

While the crisis situation we face is generally tough, it requires bold measures to get out of it. It is disappointing that the overall approach in the budget is more about preserving the status quo than transforming underlying economic structures. Industrialisation, productive capacity and state capability remain underfunded, reinforcing dependency on commodity exports and consumption-driven growth.

Despite crisis-level unemployment, the budget allocation towards public employment programmes stagnates, signalling a decline in real terms when inflation is considered. This includes public employment programmes and labour market interventions – a critical area for directly tackling the cost of living and poverty and stimulating aggregate demand in pursuit of shared, sustainable and balanced growth. The near-zero growth exposes a contradiction between the rhetorical commitment to employment creation and the actual budgetary priority given to it. Public employment as a counter-cyclical policy instrument needs greater attention.

Issued by South Africa Communist Party