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 to take place on the 19th of February, and has now been postponed to the 12th of March. The Public Finance Management Act requires that the annual budget is tabled before the start of the financial year, but in exceptional circumstances, this can happen as soon as possible after the start of the financial year.
This postponement has certainly created exceptional circumstances. The major 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 impact the poor and is frequently considered a regressive tax for lower income households as well. Using Treasury’s own VAT data, Daily Maverick estimated that a 2 percentage point increase would see the lowest income decile pay an estimated R213 more annually, which is an enormous amount relative to their total income and expenditure.
Discussions around why Finance Minister Enoch Godongwana attempted to push ahead with such a controversial policy, would require more column inches than this article allows for. Questions also remain around 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. He did state that the exact amount was not yet made explicit. DA, IFP and Rise Mzansi insiders claimed that there were only notified of the 2 percentage point increase on the morning of the budget speech.
What is essential is that partners in the GNU cannot simply criticise. There needs to be tangible alternatives presented that are able to raise R58 billion in additional revenue in 2025/2026 alone. These alternatives must be considered in relation to the decisions that were to be announced on 19 February. Reiterating once again, the need for an increase in economic growth (in itself an incredibly difficult process as decades of economic growth research has shown us) and curbing corruption, are longer term plans. There are various alternatives proposals being proposed by organisations that can, and should, be debated.
Key to recognize is that there are many debates around these issues, which require nuanced analysis and thoughtful action, in the increasingly complex political economy of South Africa. South Africans, however, do need to become more actively involved in the budget process. What many may not be aware of, is that as the general public, we can all make submissions for consideration for the budget through the Budget Tips initiative launched back in 1999 already.
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.
