Corporate leaders express concerns over the upcoming 2025 National Budget, highlighting the need for clarity on retirement reform and its implications for employee benefits and economic growth. File Picture
With the 2025 National Budget looming, corporate leaders hoping for greater clarity on the next phase of retirement reform are likely to be disappointed, says Michelle Acton, chief customer officer at Old Mutual.
His statements come ahead of the 2025 National Budget, which will be tabled this week.
“We expect the focus will be on stabilising the Two-Pot System,” Acton says. “While the government has signalled its commitment to auto-enrolment, which could significantly expand retirement savings coverage to South Africans who currently work but don’t contribute to a retirement fund, its execution will require careful consultation and collaboration before any further announcements will be made.”
According to Acton, industry stakeholders are advocating for a raise in the R350,000 tax-deductible contribution cap, unchanged since 2016. Acton says: “The retirement fund contribution cap refers to the maximum amount members can contribute to a retirement fund (pension, provident, or retirement annuity) tax-free. Historically, only higher earners have hit this limit, but the Two-Pot System may encourage more contributions. Raising the cap would allow those who can afford to save more to do so, improving long-term financial security while reducing reliance on government support in retirement.”
Old Mutual MD of corporate consultant Blessing Utete says that businesses require comprehensive policy measures to leverage employee benefits competitively. Utete is monitoring several factors that could impact retirement reform and workplace benefits:
Utete sees the 2025 National Budget as a crucial opportunity for employers to enhance workforce financial security.
“Tax incentives for retirement savings and healthcare could drive greater employer investment in employee well-being and help businesses integrate these benefits effectively into their employee value proposition,” he says.
Acton reiterates, "As businesses grapple with ongoing economic challenges, the 2025 National Budget presents a crucial opportunity to strengthen retirement savings, improve employee benefits, and drive long-term financial security. Collaboration between government, employers, and industry stakeholders will be key to ensuring that policy refinements support both workforce well-being and economic growth."
Meanwhile, Melville Douglas head of fixed income Mzimasi Mabece highlights the direct and indirect impacts of the 2025 Budget speech on investors and companies.
He says South Africa’s economic climate has changed significantly since the October medium-term budget policy statement. Back then, the rand traded at R17,60/$ compared to R18,79/$ in May 2024, bolstered by a Government of National Unity, uninterrupted electricity supply, and an inflation rate below 3.0%. The SARB cut interest rates by 75 basis points over the last year.
Finance Minister Enoch Godongwana is expected to maintain consistency and expand on themes from the MTBPS. Increases in personal income tax, VAT, and company tax rates are unlikely, though taxes on sugar, carbon, tobacco, and alcoholic beverages will likely rise, he says.
"We anticipate Minister Godongwana will reaffirm the government’s commitment to fiscal consolidation and spending cuts and may announce cost reduction proposals including pegging public sector wage increases to inflation. However, this will be challenging given how contentious salary negotiations have proven to be in the past," he says.
Mabece says Sars' (South African Revenue Services') efficiency improvements and the Two-Pot System may lead to higher revenue projections. Cost reduction proposals, pegging public sector wage increases to inflation, and debt relief for distressed municipalities may be announced, while state-owned entities like Transnet and Eskom may receive only contingency allowances.
According to Mabece, the National Health Insurance (NHI) may receive its first budget allocation. Operation Vulindlela’s Phase 2 will focus on local government reform and critical infrastructure investment, with potential ring-fenced allocations to municipalities for these projects.
Despite recent currency and bond weaknesses, fiscal metrics are expected to remain similar to the MTBPS.
"The Minister may also announce sector-specific regulations governing Public Private Partnership protocols to advance these projects," he says.
Mabece says the 2025 budget is anticipated to present a healthier prognosis for government finances, with the economy expected to grow by almost 2%. Business and investor confidence may improve with a better electricity supply and a positive political backdrop.
S&P’s recent upgrade of South Africa’s sovereign rating outlook from stable to positive reflects the MTBPS’s cautious optimism. If the Minister maintains this fiscal trajectory, a sovereign rating upgrade may be within reach, he says.
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