MALAIKA MAHLATSI: The Budget has been tabled, but the long road ahead is still uncertain

On 12 March 2025, following an unprecedented postponement three weeks ago, the 2025 Budget Speech was tabled by the Minister of Finance, Enoch Godongwana. South Africans breathed a sigh of relief, believing that the uncertainty resulting from the postponement was finally over. Unfortunately, this is far from being the case. While the Budget Speech may have been tabled, the road to the adoption of the budget is still long, and the stakes have never been higher.

In an attempt to resolve the key issue that led to the postponement of the initial Budget Speech, namely, the proposed two percentage points on value-added tax (VAT), Godongwana reduced the proposed increase to half a percentage point, with further possible increase of the same amount in the 2025/2026 financial year. This would bring the total increase to a percentage point over the next two years.

To mitigate the impact of this VAT increase on households, the National Treasury has expanded the basket of zero-rated foodstuffs and opted for no increase in the general fuel levy. Despite this, with the exception of the African National Congress (ANC), United Democratic Movement (UDM), Inkatha Freedom Party (IFP) and the Patriotic Alliance (PA), all other parties in parliament have rejected the Budget. These include parties that form part of the Government of National Unity (GNU), most notably, the Democratic Alliance (DA), which is the second biggest political party in South Africa.

The DA’s rejection of the Budget is not unexpected as the party had stated that it would not support any increase in taxes unless they were temporary. In a statement that the party released post-Budget, the party leader, John Steenhuisen, who serves as the Minister of Agriculture in the GNU, argued that the increase in VAT would leave South Africans poorer, and that the future of the government was at risk. Steenhuisen’s argument is not incorrect. VAT is a regressive tax that hits low-income earners the hardest. As such, even with an increase in social grants, higher VAT erodes the poor’s purchasing power.

Furthermore, VAT increases drive inflation. To counter this, businesses commonly pass on the hike to consumers through price increases or they reduce production costs by cutting jobs. In a country with an official unemployment rate of 31.9% (which rises to 42% when using the expanded definition of unemployment that includes discouraged jobseekers) this is a deeply worrying proposition. Thus, even with the expanded basket of zero-rated foodstuffs and an increase in social grants, inflation arising from the VAT increase is likely to erode their value.

Steenhuisen’s argument that the Budget would place the future of the government at risk is also not incorrect. This is because the Budget may not pass, especially as the DA and most opposition parties have rejected it. Following its tabling, the Budget still has to go through four parliamentary committees of the National Assembly and the National Council of Provinces (NCOP). These are: the Standing Committee on Finance, the Select Committee on Finance, the Standing Committee on Appropriations and the Select Committee on Appropriations. There, the National Treasury, led by Godongwana, will have to present the fiscal framework and revenue proposals. This is the most immediate hurdle for Godongwana as the Constitution, through the Money Bills Amendment Procedure and Related Matters Act (Act No. 9 of 2009 and amended by Act No. 13 of 2018) empowers the committees to amend or even reject the Budget. Meanwhile, parliament will also consider and adopt (or reject) the Division of Revenue Bill for the upcoming year. Following the presentation and submission of proposals, the Budget will be subjected to public hearings, which are scheduled for 25 March 2025.

Members of the public, interest groups, civil society and all other stakeholders will engage with the Budget and make commentary as well as submit recommendations. (As things stand, numerous organisations and the trade union movement have raised concerns about the Budget, with Cape Town-based Alternative Information and Development Centre (AIDC) calling for its rejection). Thereafter, parliament must consider and approve (or reject) or departmental budget. The approval will depend on the passing of the Appropriation Bill by parliament. Based on this, funds are then allocated to departments.

Only once these Bills, collectively known as the Money Bills, have passed, can the National Treasury allocate funds to government departments and other entities. The failure to pass the Money Bills would mean that government plans and projects (across national, provincial and municipal tiers of government) cannot be carried out. This is what Steenhuisen’s argument that the Budget places the future of the government at risk means. National Treasury funding extends beyond the national government. Provincial departments and entities also rely on this funding, with some of it being directed to municipalities for specific programmes.

This is unchartered territory for the South African government. Never in the history of the democratic dispensation has parliament failed to pass a Budget or the government found itself in such a precarious situation. The evolution of the party-political system, which has resulted in the end of a dominant-party system (dominated by the African National Congress) that has since been replaced by a coalition government (or GNU). The ANC, with 40% representation in parliament, no longer has the numbers to single-handedly pass the Budget. Without the DA, it will need other parties, including those in the GNU as well as opposition, to ensure that the Budget passes in just over eight weeks. It is unclear who in the opposition is willing to be engaged.

There is an indication that the ANC might look to Black-majority parties, something that was hinted at by ANC National Executive Committee member and Minister of Mineral Resources and Energy, Gwede Mantashe, who stated the debates around the Budget would split society along racial lines. But the two most prominent Black-majority parties, the EFF and MKP, are in alignment in their opposition of the Budget. In a statement, the EFF called it “shameful”. The party accuses Godongwana of handing over government fiscal policy to “the parasitic White capitalist establishment”. It has called on members of parliament and opposition parties to engage in collective and bilateral discussions to amend the proposed fiscal framework and revenue proposals that are contained in the Budget. In the same vein, the MK Party has also rejected the Budget, calling it “disappointing” and a pandering to investors. Therefore, the ANC may not find support from where it hopes to.

There is still a long road before the Budget is approved. What happens in the next few weeks might make or break the South African government as we know it.