All eyes are set to be on finance minister Enoch Godongwana this week as he’s expected to present the delayed budget speech. The road to delivery of this year's budget has been far from smooth, highlighting the complex political dynamics that play out in a GNU.
The deadlock was mostly over a proposed VAT increase to 17%, something that attracted significant pushback from opposition parties and the public. It is the ministry’s belief that the country requires a tax increase to fund the Covid grant and other social relief programmes.
The Sunday Times reports that a special cabinet committee, chaired by Deputy President Paul Mashatile, agreed on a half-percentage-point tax increase for this year and discussed a tax bill allowing similar increases in the coming years if economic growth does not generate enough revenue.
The rationale and point of departure for Godongwana is that the Covid-19 grant — an important lifeline of poor South Africans — is bound to be unsustainable.
On one hand, the minister’s insistence on the VAT increase shows the dire and difficult fiscal reality South Africa faces. But also just how difficult it can be to strike a balance when the economy is stagnant. The Covid relief fund was initially envisioned as a temporary measure to meet vulnerable people halfway. It had however, morphed into a key pillar in the government’s social relief and a safety net for many.
On the other hand, the minister’s budget formulation process has attracted criticism and raised questions about the importance of consultation with relevant stakeholders.
South Africa’s fiscal challenges are far from over, and the country’s future economic stability may depend on the success of this crucial budget
DA spokesperson on finance Dr Mark Burke called the proposed VAT increase “tone deaf”, arguing: “Just as the ANC refused to listen to objections from its coalition partners in the lead-up to its failed February Budget, the ANC now refuses to cut the fat.”
The partners in the GNU have called for more transparency and collaboration in the formulation and finalisation of the budget.
As D-Day nears, pressure is mounting for Godongwana to ensure the budget has the best interest of the nation at heart and not just responds to the fraught divisions within the ANC and the GNU at large.
The tax-hike proposal, while necessary in the eyes of the finance minister, faces opposition from parties that argue it would harm South Africa’s already struggling economy and disproportionately burden the poor.
Godongwana's task is a delicate balancing act: he must secure the revenue needed to fund critical social programmes, ensure the budget is politically palatable to his coalition partners and navigate the complex opposition dynamics. Whether he can successfully pull off this tightrope walk remains to be seen, but one thing is clear: South Africa’s fiscal challenges are far from over, and the country’s future economic stability may depend on the success of this crucial budget.
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