The National Treasury failed to consult adequately with the Financial and Fiscal Commission (FFC) on the Division of Revenue Bill before it was tabled in parliament as required by law, commission chair Patience Mbava told MPs on Tuesday.
The FFC, which is established in terms of the constitution to advise the government on financial matters and intergovernmental fiscal relations, has in the past complained that its recommendations to the Treasury on budgets have been ignored.
The commission and the parliamentary budget office, which advises parliamentary committees on budgetary matters, presented their views to members of parliament’s two finance and two appropriations committees on the 2025 budget that finance minister Enoch Godongwana tabled in parliament last week.
Both bodies criticised the proposed 0.5 percentage point VAT increase in 2025 and 2026 and cast doubt on the Treasury’s “optimistic” GDP forecasts over the next three years. The FFC said the Treasury’s higher growth forecast was “contingent on unrealistically favourable macroeconomic outlooks”.
Last week, Treasury director-general Duncan Pieterse defended the Treasury’s in-year growth forecasts as being better than its peers.
The FFC emphasised the “pressing need for a zero-balanced budget through effective debt and expenditure management interventions”, including downsizing the government to mitigate the debt spiral. It did not believe a VAT increase would yield a proportional increase in revenue for the fiscus.
The parliamentary budget office called for an expansionary fiscal policy to stimulate demand and lead to stronger economic growth, noting that “an economic strategy focused only on increasing infrastructure spending will not be enough to shift the economy from its current low growth trajectory”.
Mbava said the FFC did not make any final input on the Division of Revenue Bill, which divides government revenue between national, provincial and local governments.
She noted that the consultation with the FFC was legislated in the Intergovernmental Fiscal Relations Act, which required that at least 14 days before the tabling of the budget there must be a consultation with the FFC on the proposed allocations in the Division of Revenue Bill.
Its recommendations on the proposals must be considered and included in the memorandum to the bill itself. Mbava said the 14-day window period was not sufficiently implemented.
She said the FFC required enough time to review the proposed allocations and provide feedback. “The consultation is not perfunctory, the consultation is substantive,” she noted.
The FFC could ensure that the allocations were in line with the country’s fiscal capacity and protect constitutional values and rights.
“Consultation is to ensure that there are checks and balances on the budget process. The consultation is also to ensure that there is equitable resource distribution. We need to be transparent and accountable in terms of how we engage with this process. The 14-day window period during which we were supposed to be consulted on the final Division of Revenue Bill to be tabled was not done.
“The FFC as a constitutional institution did not make any final input into the Division of Revenue Bill that was tabled,” said Mbava. It was parliament’s role, she emphasised, to protect the constitutional role of the FFC, “so we leave it to parliament” to decide whether the budget process was being adhered to.
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