In his state of the nation address (Sona) last week, Cyril Ramaphosa paid the most attention to the subject technology of any Sona he has delivered as president when he promised a sweeping set of tech-led reforms across government – all of which will, of course, cost money.
That means eyes are now turning to Ramaphosa’s finance minister, Enoch Godongwana, who must find the resources to pay for these projects when he delivers his 2025 budget speech next Wednesday.
Over and above the president’s promises, lobby groups have been calling for tax relief. Communications minister Solly Malatsi’s call to remove the luxury tax on smartphones is a good example of this. But cutting taxes threatens to shrink an already-overburdened public purse.
This sort of balancing act is nothing new to Godongwana, who in his budget speech last year chose to cut government spending to reduce government debt. He said then that ballooning debt servicing costs absorbed more than 20% of government’s revenues, or more than the state spends on social protection, health, or peace and security.
“Our challenge, honourable members, is that the size of the pie is not growing fast enough to meet our developmental needs,” Godongwana said. That challenge isn’t going away anytime soon, yet hopes are high that the funds will be found to pay for the president’s promises.
These, then, are some of the major tech-related initiatives that ICT sector role-players will be looking for detail on in the finance minister’s speech in parliament next Wednesday.
Ad varolem tax on smartphones
Malatsi, the communications minister, has lobbied national treasury for the removal of ad valorem (luxury) taxes on 4G devices. His drive to make smartphones more affordable is aimed at allowing poorer segments of the population to upgrade to 4G-enabled devices before the country’s mobile networks switch off their 2G and 3G networks.
But these taxes are a significant revenue generator for the state: the South African Revenue Service in 2023 collected R3.2-billion in ad valorem taxes on cellphones alone.
Read: Calls mount for treasury to scrap luxury taxes on smartphones
Telecommunications industry lobby group the Association for Comms and Technology has echoed Malatsi’s calls, saying that driving down the cost of devices is pivotal to bridging the digital divide in South Africa.
“ACT has advocated for policies to dismantle barriers to digital access, particularly device affordability challenges. ACT requested national treasury to eliminate luxury taxes on devices and remove VAT for low-cost 4G/5G devices, whether imported or locally produced,” said ACT CEO Nomvuyiso Batyi.
Electric vehicles
The motoring industry has lobbied for a review of the ad valorem tax scale so that electric vehicles below a given minimum threshold are no longer taxed as luxury goods. This could be applied permanently or temporarily until EV uptake reaches some predefined level.
The DA, while it was still the official opposition prior to the formation of the government of national unity, called for a review of the import duties applied to EVs. South Africa levies a 25% import tax on EVs, higher than the 18% it imposes on internal combustion engine vehicles. This penalises buyers who want to move to greener mobility. Many countries offer tax incentives and direct subsidies to encourage EV uptake.
Godongwana in his 2024 budget speech introduced long-awaited industry incentives allowing local manufacturers to claim back up 150% of “qualifying investment spending” in the production of electric and hydrogen vehicles. Now the industry is waiting to see if this incentive scheme will be expanded to include a wider spectrum of drivetrain technologies that fuel other “new energy” vehicles.
Read: DA wants import duties on electric cars scrapped
“We are working to finalise comprehensive NEV policy guidelines that do not exclude alternative technologies such as hybrids and plug-in hybrids,” Ramaphosa told automotive industry stakeholders at Auto Week in Cape Town last October.
“So, consideration must be given to incentives for manufacturers as well as tax rebates, or subsidies, for consumers to accelerate the uptake of electric vehicles. This is not just about creating a greener future, but also about ensuring South Africa remains competitive in the global market.”
Digital public infrastructure
Ramaphosa in last week’s Sona announced a revamp of the gateway to government online services, the gov.za platform, to make access to information and services more centralised, and therefore easier to access.
The president was not clear about whether this overhaul involves the main www.gov.za website or all other sites using .gov.za. Also not specified was the full scope of the digital public infrastructure government aims to build.
Home affairs
The president said the digital transformation at home affairs will be “at the heart” of government’s revamped systems. Home affairs, under the leadership of DA MP and minister Leon Schreiber, has been tasked with implementing a digital ID system, which will include digital driver’s licences. Visas are also going to be digitised as South Africa gears up to attract digital skills and investment to drive economic growth.
A World Bank study of the cost drivers of digital ID systems include the choice of credentials used, timelines for mass enrolment, the choice of biometrics for the system and the number of biographical fields per profile. Procurement processes could drive costs higher.
“The procurement process followed by a country can have a signification impact on the overall cost and sustainability of a foundational ID system, irrespective of other system design choices – the impact of procurement strategies on overall cost can vary from 25% to over 100%,” said the report.
Digital forensics lab
The combination of cybercrime and complex financial crime (also with a strong digital component) raises the need for a more capable law-enforcement body equipped with the skills and tools needed to deal with sophisticated new-age criminals.
Government’s planned digital forensics lab will require state-of-the-art tooling along with personnel skilled enough to make use of it – neither of which will come cheap. – © 2025 NewsCentral Media
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