What Dawie Roodt would do as South Africa’s Finance Minister

With the 2026 Budget Speech approaching, Efficient Wealth chief economist Dawie Roodt outlined the changes he would make if he were South Africa’s Finance Minister.

“As the Minister of Finance, there are so many things that I would have done,” Roodt told Daily Investor. “But the first would be the overhaul of the tax regime.”

“I would dramatically simplify the total tax regime in South Africa. South Africa has a very expensive and a very complicated tax regime. We need to simplify that. We need to make it easier. It is very, very expensive.”

Roodt explained that he would probably try to increase South Africa’s value-added tax (VAT), which currently stands at 15%.

The reason is that VAT is the only tax that can be raised to substantially increase the country’s revenue. This would also allow the Treasury to reduce “other more damaging taxes”, such as corporate taxes and personal income taxes.

“But in case of VAT, I will try to eliminate all exceptions, for example the certain zero-rated items. That’s a bad thing,” Roodt added.

However, he acknowledged that, politically, increasing VAT would be extremely difficult. Indeed, the proposed VAT hikes in the 2025/26 Budget Speech caused an uproar.

The Budget Speech, which Finance Minister Enoch Godongwana was initially set to present in February 2025, was delayed when members of the Government of National Unity could not reach a consensus on a proposed VAT hike.

The contention specifically surrounded a two percentage-point VAT hike, which the DA refused to sign off on. Following this, the Treasury announced that it would be increasing VAT by one percentage point over two years.

This would have been done by hiking the VAT rate by 0.5 percentage points in each of the next two years, bringing it to 16% in 2026/27.

To accommodate these increases, the Treasury announced it would expand the list of zero-rated VAT items to support households.

However, Godongwana announced on 23 April 2025 that the 0.5 percentage point increase in the VAT rate, due to take effect on 1 May 2025, wouldn’t be implemented.

Taxes, the NHI, and national debt

Another change Roodt said he would make as Finance Minister, which would also be difficult politically, would be to adjust personal income taxes.

“Without a doubt, I would lower personal income taxes, especially the marginal rates. I will reduce the number of brackets and also try to eliminate all tax deductions as far as possible,” he said.

He added that he would also reduce South Africa’s corporate tax rate, which currently stands at 27%. This is nearly double the Organisation for Economic Co-operation and Development’s minimum tax rate of 15% which some other countries are charging.

“We must reduce corporate taxes. South Africa’s corporate taxes are far too high compared to the rest of the world. In order to improve our competitiveness, you have to reduce corporate taxes,” he said.

According to Roodt, improving the country’s tax regime is the best possible way for the Minister of Finance to support economic growth and investments in South Africa.

There were also several areas of the Budget that Roodt said he would cut. This includes social expenditure, which he said South Africa spends too much on.

“Then we have to do something about the wage bill. Civil servants are mostly overpaid and underworked, and we need to reduce the civil servants’ pay,” he said.

“We simply cannot afford that. The economy’s just not growing fast enough to support this massive expenditure.”

According to the latest provincial government financial statistics, published by Stats SA, provincial government expenses amounted to R704 billion in the 2023/24 financial year.

Compensation of employees was the main cost driver, accounting for almost two-thirds (64%) of the total expenditure, at R451 billion.

Roodt also commented on the controversial National Health Insurance (NHI) Act, which has been the subject of criticism and legal challenges for several years.

“The NHI is dead. We won’t be able to afford that,” he said, adding that the NHI should be scratched entirely.

Finally, Roodt commented on the country’s debt management. Currently, South Africa’s debt is hovering near 78% of GDP, with debt-servicing costs absorbing around 5% of GDP.

He explained that the issue South Africa is facing is not debt management, per se. “Debt is actually quite well-managed. It’s more of a problem with economic growth,” he said.

“We need to get the economy to grow faster, because that will reduce the ratio of debt to GDP. And, of course, that will reduce the deficit to GDP as well.”