Now that finance minister Enoch Godongwana has decided to reverse his domkop VAT increase and a court has suspended it, SA must reflect on the role of the National Treasury, which has become too powerful and arrogant despite its incompetence.
This is shaping up to be SA’s third consecutive year of GDP growth that is less than 1%. By the end of 2025, GDP per capita will be lower than in 2007. After 18 years of declining living standards, the Treasury’s incompetence should be obvious to everyone.
If that is not enough, its humiliation in two court judgments since the start of the year, the comedy show that resulted in two failed budgets and the possibility that a third budget could also be rejected, should seal the case.
On January 23 a scathing high court judgment gave the Treasury a punch in the nose. It found in favour of the Institute for Economic Justice and #PaytheGrants and ordered the Treasury to eliminate cruel administrative barriers that prevented more than 10-million people from accessing the R370 a month social relief of distress grant.
If the Treasury loses its appeal it might have to pay up to R70bn a year. Now the Western Cape High Court has halted the VAT increase and set aside the faulty fiscal framework. The judgment, and the dramatically changed global and domestic economic outlook after US President Donald Trump’s tariffs against the rest of the world, means there must be a third budget.
After more than two months of blunders, including making a major policy U-turn that contradicts what it said in court the previous day, the Treasury appears to have learnt nothing. It has arrogantly rejected all the alternative proposals that were put forward by about 50 organisations and individuals in parliament.
Godongwana has shown that he has run out of ideas on how to grow the economy and create jobs, and should resign. Only weeks after he told Moneyweb that endless budget cuts to balance the books were a self-defeating policy that had resulted in a higher debt ratio, the Treasury has started manufacturing the crisis that there is a budget shortfall and again targeted the most vulnerable people in society by threatening to cut spending on social security to balance the books.
Parliament must again reject these proposals, which are just a different way of implementing failed austerity policies.
There is no budget shortfall, and the sky will not fall if we do nothing and leave the money in the economy. The March budget projected net additional VAT receipts of R68.6bn after considering the cost of zero-rated items.
This was equivalent to 0.9% of main budget spending over the three-year medium-term expenditure framework (MTEF) period and will add one percentage point to the projected debt ratio of 75.1% for 2027-28.
It is painful that we had to waste so much time arguing against an idiotic VAT increase instead of addressing the unfolding global and domestic economic crisis.
Last week I moderated a debate between political leaders and parliamentarians at the Financial & Fiscal Commission in Cape Town. EFF senior researcher Gumani Tshimomola said the biggest mistake we made was to put the Treasury in charge of macroeconomic policy. This has meant that SA’s developmental goals must fit into the MTEF envelope.
SA needs a super ministry — a proper planning commission, not the joke we have — that is in charge of macroeconomic policy and ensures that budgets are aligned with the country’s developmental vision and plans. The Treasury must become like an ATM.
• Gqubule is an adviser on economic development and transformation.
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