It is expected to be smooth sailing as finance minister Enoch Godongwana returns to parliament on Wednesday for a third try at passing the budget, after disputes with coalition partners over plans to increase VAT scuppered two previous attempts.
Cabinet ministers and a senior government official told Business Day that Godongwana this time “took the bull by the horns” and individually consulted government of national unity (GNU) partners before successfully presenting the “broad strokes” to the cabinet last week.
“There is certain market sensitive information around borrowing that he did not share [with us] but that is expected to be minimal because of saving through the budget review process,” one cabinet minister said.
Godongwana has to plug a R75bn revenue hole after he was forced to backtrack on raising VAT, but remains committed to debt stabilisation.
“The target is a 30% debt reduction by 2030 and this will be a function of economic growth. Once we create an environment of growth, stabilising debt and meeting our fiscal targets will be easier,” a senior government official said.
Another failure to pass a budget could eventually see spending throttled on everything from front-line services to support for ailing state-owned companies such as power utility Eskom.
Godongwana in presenting Budget 3.0 is torn between the urgent priorities of raising extra revenue, cutting spending and increasing investment.
The minister announced he would return to parliament to again table a budget after introducing the Rates and Monetary Amounts and Amendment of Revenue Laws Bill to “reverse” the two successive 0.5% percentage point VAT hikes he pencilled in for this and the next fiscal years. These were widely rejected by political parties and overturned in court.
During Godongwana’s talks with the DA, the party is understood to have agreed to allow differences with the ANC over the Expropriation Act to be resolved by the courts. It also reached consensus on the way forward on private sector participation in the Cape Town and Richards Bay ports and agreed on an “internal” review of all government spending by December 2025.
“Godongwana did not feel safe [as finance minister] after failing on the budget matter and this seemed to result in a major shift in his approach,” another cabinet minister said.
“For the first time, the ANC seemed to realise it was sharing power. This was the first major legislation that had to go through the GNU and [Godongwana] came in with the completely different approach in the last few weeks.”
Last year’s general election failed to produce an outright winner, with the ANC setting up a 10-party coalition to allow for President Cyril Ramaphosa’s second term as head of state.
The rand surged to its strongest level against the dollar in two months after deputy finance minister David Masondo said at an investor conference in Cape Town last week a fourth budget presentation would be unnecessary due to thorough consultation with all GNU parties.
Masondo also suggested an announcement would be made “very soon” on the government’s review of the inflation target.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.