KHAYA SITHOLE

In just more than a year finance minister Enoch Godongwana has managed to craft four budgets, reflecting the truly chaotic, unpredictable world we live in.

At the beginning of February 2025 a finance minister accustomed to a status quo in which ANC MPs would automatically endorse a budget proposal presented by one of their own suddenly discovered that things had changed.

The loss of the ANC’s majority in the 2024 general election and subsequent presence of other parties in a government of national unity meant the guaranteed endorsement of yesteryear, which came with little scrutiny and multiple retreats from difficult decision-making, could no longer be counted on.

The ANC’s habit of deferring difficult calls to an unspecified time in future was reflected in the annual commitment to debt stability, which was ever-present in budget speeches but ever-absent in actual implementation. In 2008-24 the country’s national debt exposure rocketed from 23% of GDP to 74% and the costs of servicing it shifted from 9% to 21% of GDP.

Decisions to approve bailouts instead of implementing reforms, deference to the sacred relationship between the trade unions and the state and a paralysing inability to grow the economic base and associated revenues led to the escalation of debt dependency.

The ironic effect of the debt trap is that the commitments the ANC held dear — investing in the social wage by deepening and widening the social coverage net and infrastructure investment to drive growth — are gradually displaced when debts have to be repaid. Poor credit ratings, greylists and governance lapses meant even the incremental reduction in debt servicing costs that is possible when the economic fundamentals are on a better footing were not available to South Africa.

These intersectional issues led the finance minister to opt for a budget based on tax increases through a VAT hike from 15% to 17%. In the minister’s plea the basic premise was that all other avenues of balancing the books had been explored and found wanting.

The political defeat that ensued kept the hike at bay and various parties — some new to consequential decision-making of this magnitude — claimed alternatives could be explored and they would show the minister how to do it. Since then none of the parties have actually publicised any imaginative or substantive proposals on resolving the national resource allocation logjam.

This meant that if all the issues canvassed in preparing the initial 2025 budget had remained true the 2026 budget — with the tariff wars, geopolitical tensions and South Africa’s broken romance with the US that have dominated since 2025 — would have been more complicated than the 2025 version.

Fortunately, the commodities boom that has occurred at the same time gave the minister some breathing space and the tax windfalls associated with the commodity boom profits meant he didn’t have to ask for more tax revenue and could even provide long-delayed relief.

While this is welcome, the problem with fortuitous windfalls is that they are an unpredictable instrument that should be supplementary rather than fundamental to budget planning.

Beyond the relief of last week we need to understand what the picture would have looked like had the fortuitous gains not materialised. The nature of the exogenous factors that underpin windfalls and adverse events is that they are as uncontrollable as they are unpredictable.

Import tariffs, US President Donald Trump’s signature instrument, which have caused so much market upheaval, had hardly been struck down by the US Supreme Court just days after Godongwana’s budget when the US and Israel attacked Iran, igniting a new crisis whose fallout seems likely to be universal and prolonged.

Such opposing events occurring within days of each other indicate how difficult the task ahead will be for Godongwana and signal that the tax relief he granted may be temporary.

• Sithole is an accountant, academic and activist.