By Michelle Meixieira Groenewald
Welcome to a budget we need to pass under the Government of National Unity. South Africa’s Budget Speech was scheduled for the 19th of February and has now been postponed to the 12th of March. The Public Finance Management Act requires the annual budget to be tabled before the start of the financial year, but in exceptional circumstances it can happen as soon as possible after the start of the financial year.
This postponement has certainly created exceptional circumstances. The main point of contention was a proposed VAT hike from 15% to 17%. This opposition ranged from certain ministers within the ANC to the Democratic Alliance to trade unions and civil society organisations.
There is widespread consensus that this would disproportionately affect the poor and is often seen as a regressive tax for low-income households. Using Treasury’s own VAT data, Daily Maverick estimated that a 2 percentage point increase would result in the lowest income decile paying an estimated R213 more per year, which is an huge amount relative to their total income and expenditure.
Discussions of why Finance Minister Enoch Godongwana attempted to push ahead with such a controversial policy would require more column inches than this article allows. Questions also remain about the extent of consultation, with the minister confirming that during a cabinet meeting on 5 February it was highlighted that a VAT increase was on the table. However, he stated that the exact amount had not yet been made explicit. DA, IFP and Rise Mzansi insiders claimed that the 2 percentage point increase was only revealed on the morning of the budget speech.
What is essential is that partners in the GNU cannot simply criticise. Tangible alternatives must be put forward that are capable of generating R58 billion in additional revenue in 2025/2026 alone. These alternatives must be considered in the context of the decisions to be announced on 19 February. Once again, the need to increase economic growth (in itself an incredibly difficult process, as decades of economic growth research has shown us) and curb corruption are longer term plans. There are various alternative proposals being put forward by organisations that can and should be debated.
It is important to recognise that in South Africa's increasingly complex political economy, there are many debates on these issues that require nuanced analysis and thoughtful action. However, South Africans need to become more actively involved in the budget process. What many may not be aware of is that we, as members of the general public, can all make submissions for consideration in the budget through the Budget Tips initiative, which was launched in 1999.
What we can hope for is that this postponement will create greater awareness and encourage more South Africans to engage more deeply on policies that affect us all. The rest is up to GNU.
