By Simon Nare
The decision by Cabinet to postpone the Budget Speech on Wednesday was necessary because the Government of National Unity needed to work out how it would fund priorities in the country, according to Finance Minister Enoch Godongwana.
He confirmed to reporters, who found out at the last minute that the Budget would not be delivered, that it was derailed due to a disagreement over increasing value-added tax by two percentage points and what the implications were on the government fiscus and normal South Africans.
The news sent shockwaves throughout the country and the markets. This is the first time since the dawn of democracy that the tabling of the Budget has been postponed.
It is also the first budget of the Government of National Unity.
As the news spread, President Cyril Ramaphosa moved swiftly to assure South Africans that while the postponement was the result of disagreement, it was also a collegial and mature consensus within Cabinet.
“We are called upon as the national leadership to pursue all initiatives aimed at growth in order for us to increase employment and alleviate the effects of poverty.
“The Government of National Unity will in the coming days and week intensify our efforts to balance the imperatives that drive the fundamental growth objectives of this administration with the realities of a constrained fiscal environment,” he said in a statement on Wednesday night.
It is understood that the hike was rejected by most Cabinet members, including some from the African National Congress.
Godongwana said that while the hike was the trigger for the postponement, there were other issues at play.
“Was the 2% alone the only contentious issue? You can’t have the 2% without talking about what is going to replace it without that becoming contentious. What I am trying to say is that what is contentious.
“What we are grappling with is not necessarily the 2%. What we are grappling with is given the priorities and the challenges we are facing, [is] how do we fund them. Really that is the debate. Do we borrow money? What are the implications of that? Do we continue cutting the expenditure? What are the implications of that?” he asked.
Godongwana said the government was in a pickle on how it should fund its priorities.
While it had options such as raising tax, there were other complications.
He said Cabinet generally agreed in the current environment that the government needed to find a way to fund its priorities.
The raging debate was what was the best way to do that.
Godongwana further explained that the contentions issues were raised on Wednesday morning because that information had not been shared with the Cabinet due to it being market sensitive.
He said that normally such sensitive information was shared with the Cabinet for its approval on the morning of the day the Budget was tabled in the National Assembly.
The minister added that usually his department would give an indication, as it did in a Cabinet meeting two weeks ago.
“We didn’t put some of the issues on the table. We normally put it early in the morning. The unfortunate thing today is that’s why we didn’t start early was because the president was not around, so we started late. So, it’s normal to do that,” he said.
Godongwana said that although the final Budget was delivered by the finance minister, it required the deliberations and approval of the Cabinet before its tabling.
“Cabinet considered that although the tabling of the 2025 Budget was scheduled for release at 2pm, 19 February, a postponement is needed to allow for further deliberations to take place on the Budget.
“Cabinet is united on the view that the Budget must strike a balance between the interest of the public, economic growth and fiscal sustainability. Furthermore, the Budget is produced and presented to the National Assembly according to rules outlined in the Public Finance Management Act,” he said.
He said Section 27 of the Act required that the Budget be tabled in the beginning of the financial year or in exceptional circumstances, on a date to be determined by the finance minister as soon as possible.
“Therefore, further Cabinet discussions will take place in preparations for a new or amended Budget to be tabled on the 12 March 2025,” Godongwana said.
Minister in the Presidency Khumbudzo Ntshavheni told reporters in the same briefing that disagreements over the VAT hike were raised by Cabinet members from all political parties.
She said a press statement released by the Democratic Alliance claiming that the postponement happened after it objected to the increase was misleading.
“It was neither a DA issue, an ANC issue or PAC issue or DA versus ANC or a PAC versus ANC issue, it was a Cabinet decision. And the focus of discussion is not about party politics, it is about what is the balance that we need to achieve between managing our fiscal framework, managing our ability to protect the interests of South Africans,” Ntshavheni said.
Shortly after the postponement, the DA said it had fiercely opposed the increase and blamed the ANC and Godongwana for failing to engage meaningfully for alternatives it tabled.
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