Prof Bonke Dumisa
In an unprecedented, and hopefully, never-to-be-repeated development, the South African Minister of Finance Mr Enoch Godongwana finally successfully delivered the National Budget Speech on Wednesday 12 March 2025.
Having been botched three weeks earlier on Wednesday 19 February 2025 when the ANC’s major political partner in the Government of National Unity (GNU), the Democratic Alliance made it public that it was going to oppose the passing of the National Budget.
This was unprecedented in post-apartheid South Africa that the delivery of the Budget Speech was cancelled on the set date and day when all the parliamentarians had already assembled in Cape Town, at great cost to the South African taxpayers.
The National Budget Speech which had already been released to most relevant stakeholders, like the mass media, and all the parliamentarians, under the normal standard embargo conditions, on Wednesday 19 February 2025, immediately became the most sought-after “leaked” document like hotcakes.
Noticeably, the DA was the first major political party to publicly make an official statement that it had warned the African National Congress (ANC) that it was going to oppose the Budget because it, the DA, was fundamentally opposed to the proposed 2 per cent increase to the Value-Added-Tax, VAT, as contained in the Budget Speech.
Whilst I understood why the DA could be opposed to any VAT Increase, primarily because VAT is regressive, personally as a lawyer I was immediately concerned that an important partner in the GNU was the first to break an embargo on an official government document.
Does this not set a dangerous precedent that, in the future, anyone can publicly directly deal with the contents of an embargoed official document?
Having been one of the people who publicly mentioned, on my Budget Previews on TV, radio, and print media, that it would be very ill-advised for the government to raise VAT because it is regressive because it negatively affects the poorest of the poor far more than it affects the high-income groups, I was disappointed to learn that the ANC-led GNU was just about to raise the VAT by a whole two per cent.
In understanding politics, it is always crucial to understand the context before you can pronounce what has been said by politicians. It was thus very puzzling that the DA, which usually protects the interests of the super-rich and rarely considers the plight of the formerly oppressed and still highly disadvantaged Black masses, was the one which was raising their opposition to a VAT increase purportedly because it was going to negatively affect the poor.
It has since transpired that the DA was merely using their opposition to a VAT increase as a bargaining chip for other demands which were not necessarily in support of some of the measures implemented by the ANC in redressing some of the past racial imbalances in a post-apartheid South Africa.
For more on this, research the Cabinet Meeting Briefing by Minister Khumbudzo Ntshavheni on Thursday 13 March 2025 with regards to what transpired at a cabinet meeting on 03 March 2025 where the issue of the proposed 2% VAT increase was discussed.
As a matter of principle, I refused to read the botched Budget Speech of Wednesday 19 February 2025, I thus do not know what was contained in the Budget Speech of Wednesday 12 March 2025 that was originally on the earlier budget speech. I thus do not know what was later improved on after the botched budget speech delivery, save to say the opportunistic rejection of the earlier budget speech helped in forcing the ANC to reconsider the bad aspects of their earlier budget speech. This is even more important because some of the ANC people did anonymously mention that they had opposed the proposal of the 2% VAT increase.
The Budget Speech delivered on Wednesday 12 March 2025 was a very pragmatic document that took into consideration the overwhelming rejection of a 2% VAT increase.
Life is a game of pragmatic trade-offs; it was thus a realistic compromise by the Minister of Finance and his budget team to agree to raise the VAT by only 0.5% in the financial year 2025/26 and by another 0.5% in the following financial year 2026/27. This is far less negative for the VAT to be increased by only 1% to 16% than it would have been if it was immediately increased by 2% to 17%.
The Minister of Finance was quick to point out that they have increased the number of zero-rated products to protect the poor. He also mentioned that they will make no adjustments to personal income taxes; and that they will continue with the current fuel levy relief. It is thus very presumptuous and wrongly simplistic to shout that the ANC is now so anti-poor that political parties who are going all out of their way to protect apartheid-era privileges are now more politically relevant than the political party that led the anti-apartheid liberation struggle.
It was important to note that the Budget Speech 2025 mentioned that the South African Revenue Services, SARS, has been allocated an additional R7 billion to strengthen them in improving their capacity to collect more revenues, especially from the hundreds of thousands if not millions of people or businesses who are highly economically active yet not paying any taxes.
For example, SARS said that they have detected at least 156 000 individuals/ businesses who are not registered as taxpayers, despite their substantial economic activity. Let’s hope the SARS Commissioner will use this additional money to go after all those irresponsible free riders who live in high-priced suburbs, driving very expensive imported cars, yet pay no taxes.
It was worth noting that in his budget speech, Enoch Godongwana emphasized that the government is actively embarking on government debt stabilization. Let us hope these will not just be words; the government debt of close to R6 trillion, with debt servicing costs of R424.9 billion just unsustainable; hence justifying any reasonable belt-tightening measures, even when the ANC’s tripartite alliance trade union comrades contemptuously label such belt-tightening measures as “austerity measures”.
All in all, I can live with this Budget 2025, though I believe that the continuous budget deficits are unhealthy, and that is the reason we have been continuously in junk status since the year 2018. In short, this was a very pragmatic budget. Let us hope and pray that the R1 trillion ringfenced for public infrastructure spending over the next three years will not be the source for other corruption scandals.
* Prof Bonke Dumisa is an independent economic analyst.
** The views expressed do not necessarily reflect the views of IOL or Independent Media.