On Thursday, 6 February 2025 at 7pm, President Cyril Ramaphosa will present his State of the Nation Address from the Cape Town City Hall.
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“We’re expecting this year’s tone to be more positive as we move further away from problems present during the 2023 and 2024 SONAs,” says Roxanna Naidoo, Head of Global Strategy at Latita Africa.

These are the topics she feels are more likely to be the highlights of the address.

GNU
Obviously, with the Government of National Unity serving its first term, the SONA is the ideal platform to spotlight both its success as a multiparty coalition and its achievements since it came into power. “It’s likely the GNU will feature strongly in the introduction with references to it peppered throughout the speech to expand public support,” says Naidoo.

Energy security
While 2023’s SONA described the need and plan to end load shedding, the 2024 SONA was more optimistic, with work towards solving the crisis nearing completion. In 2025, load shedding is almost a distant memory with only a small risk of returning. “The President will probably frame this as a resounding success, assuring the achievement of other energy projects, such as the Just Energy Transition, and private energy investments and developments,” says Naidoo.

TransNet
A key problem area in the last two SONAs, TransNet is expected to turn a profit in 2025. However, this will reportedly arise from it selling off some of its property. “I think South Africans are more interested in whether or not TransNet can reliably deliver critical services for business, and we are expecting the President to share progress on its operational rehabilitation,” says Naidoo.

Global leadership
South Africa’s G20 presidency, its pioneering role in BRICS and the organisation’s continuing expansion, as well as its hosting of the G20 summit later this year, promise to project the country as a capable world leader. “This gives us the opportunity to shape global policy while promoting South Africa’s reputation on the international stage, and the President is sure to touch on how this will benefit the nation,” says Naidoo.

The usual suspects
Concerns like economic growth, water security, corruption, crime and gender-based violence have also featured heavily in the two previous SONAs, and remain far from resolved. Although the President will probably highlight the jump in the matric pass rate from 80.1% (2022) to 87.3% (2024), youth unemployment is still a major issue. So is unemployment in general, poverty and the struggle to create jobs faster than workers enter the market. “Although we aren’t expecting any sudden leaps forward in progress on these issues, we’re at least hoping for encouraging improvements,” says Naidoo.

Cautious optimism?
SONA 2025 should be more celebratory than previous years, without marginalising the work that still needs to be done to secure economic growth and equity, political and social stability, foreign investment, and other imperatives.
“That said, we’re seeing further tectonic shifts in the world order and this could lead the President to be more cautiously optimistic in his outlook for 2025,” says Naidoo.
 
ENDS

MEDIA CONTACT: Idéle Prinsloo, [email protected], 082 573 9219, www.atthatpoint.co.za 
 
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President Cyril Ramaphosa recently signed into law the Global Minimum Tax Act and Global Minimum Tax Administration Act.

“The new legislation gives effect to the OECD Global Anti-Base Erosion (GloBE) rules designed to alleviate a member country’s potential tax losses due to Multinational Enterprises (MNEs) operating out of foreign low-tax jurisdictions,” says Jordan Mulindi, Tax Attorney at Latita Africa.

Both laws aim to enforce a minimum 15% global tax on all MNEs based or operating in South Africa with consolidated worldwide revenues above R14.4 billion in at least two of their previous four financial years.

What it means to South Africa
Approximately 40 companies in South Africa appear to qualify for this tax. Yet, their contribution to the country’s GDP - and the resulting loss in tax revenue - can be significant.

Simply put, these MNEs will have to make up the difference between their effective company income tax in low-tax regions and the 15% target, resulting in a Top-up Tax payable to SARS.

However, the OECD GloBE rules, which are often referenced in the new legislation, are remarkably complex, with sophisticated conditions. To apply them correctly and beneficially, MNEs will have to carefully review their corporate and tax structures and adapt accordingly.    

GloBE Information Return
A core consideration of the system is the GloBE Information Return (GIR) that must be submitted to SARS by each entity belonging to the MNE (Constituent Entity), both locally and abroad. Similarly, the Constituent Entities of foreign MNEs operating in South Africa must submit a GIR for their own tax authority.

How these submissions should be made varies, from all entities nominating either a local or foreign entity to submit a consolidated return on their behalf, to some not having to make submission at all due to this function being performed in another jurisdiction having a Qualified Competent Authority Agreement with South Africa.

“However, they do it, communicating complete and correct information to key entities will be vital,” says Mulindi.

Transition year
Because the new legislation is backdated to 1 January 2024, there is concern that there will not be enough time to implement the systemic changes needed to satisfy it. However, the Acts and the GloBE rules specify a Transition Year to accommodate this switch over.

Companies will normally be required to submit their GIR 15 months after their year-end. Initially, though, companies whose financial year starts between 1 January 2024 and 1 January 2025 will have 18 months after their year-end to make their submission.

“So, for example, a company whose financial year begins on 1 March 2024 will only have to submit a GloBE Information Return 18 months after its year-end on 28 February 2025,” says Mulindi.

Again, there are exceptions and exclusions to this rule that MNEs must make themselves aware of.

Penalties
The penalties for non-compliance are not significant compared to typical MNE revenues, with a base administrative penalty up to R50 000; double that if the Top-up Tax exceeds R5 million; and triple that if it exceeds R10 million.

“However, the new Acts are applied on top of - not instead of - the existing Tax Administration Act, in which case penalties and interest on late Top-up Tax can become substantial,” warns Mulindi.

The How-To
So how should South African MNEs approach the new legislation?

First, read through the OECD’s GloBE rules in its primary document titled Tax Challenges Arising from the Digitalisation of the Economy - Global Anti-Base Erosion Model Rules (Pillar Two), available on the OECD website. Understanding the rules and terminology used in the document is essential.

Next, read the Global Minimum Tax Act and Global Minimum Tax Administration Act. They are only around 8 and 4 pages respectively, in either English or Afrikaans.

On the OECD website, there are several supporting documents, including consolidated commentary, guidelines, explanations and examples.

With this understanding, you can review your own MNE’s corporate and tax structures, tax efficiency strategies, revenue impact and more.

“However, when it comes to determining differences in multijurisdictional tax laws, agreements and timings, and how to overcome these complexities, we strongly suggest you turn to a tax expert with a strong legal function,” says Mulindi.
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ENDS
 
MEDIA CONTACT: Idéle Prinsloo, [email protected], 082 573 9219, www.atthatpoint.co.za 
 
For more information on Latita Africa please visit:
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LinkedIn: https://www.linkedin.com/company/latita-africa/?originalSubdomain=za
Facebook: https://www.facebook.com/latita.africa/       
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