By Thebe Mabanga
Finance Minister Enoch Godongwana conceded that he and the ANC have learnt lessons from the Budget and VAT hike fiasco.
The minister has proposed 21 May as the date of tabling the third instalment of the national Budget.
“We have learnt lessons,” Godongwana said at a media briefing he hosted with his equally embattled director-general Duncan Pieterse. “One of them is that we are in a coalition government. We have do something differently.”
Godongwana doubled down on his stance that he would not resign unless relieved of his duties by President Cyril Ramaphosa. He does not expect a motion of no confidence against him to succeed as ministers are not elected by Parliament, unlike the president, who could face such a motion, and he would fall with him if he did.
Explaining the budget reset process, Godongwana noted: “This comprehensive review will include the Fiscal Framework, the Appropriation Bill, Division of Revenue Bill, and already tabled Rates and Monetary Amounts and Amendment of Revenue Laws Bill.”
The latter contains the decision to reverse the VAT hike that was to kick in on Thursday and is currently on hold due to a court order.
He noted that there would be extensive consultation.
“This includes formal consultations with the Financial and Fiscal Commission, thorough consultations with all political parties within the Government of National Unity as well as Cabinet approval before presentation to Parliament.”
This leaves unclear the position of parties like ActionSA, who are outside of the GNU but had supported him in the adoption of the Fiscal Framework and Revenue Proposals, which has since been nullified.
Godongwana laid the ground for the upcoming negotiations by pointing out that measures that were designed to cushion the VAT increase, such as increased grants and a wider VAT exemption net, would need to be reviewed.
He refused to be drawn on whether he had identified any areas of savings.
Godongwana pointed out that the idea of tapping it into funds like the Temporary Employee Relief Scheme (TERS), which was put in place during the Covid-19 pandemic, would not work as TERS fell under the Unemployment Insurance Fund, which was governed by separate legislation.
Pieterse noted that Section 10 of the Money Bills Act gave the government up to four months after the start of the financial year to put a budget in place and Parliament adopt it.
As the financial year starts at the beginning of April, this gives the government until the end of July.
The Public Finance Management Act through Section 29 makes provisions for spending to continue at 45% of the preceding year’s levels for the first four months and 10% thereafter if a new budget is not in place.
Provinces and municipalities receive 45% of their allocation.
Asked whether this episode has dented government credibility in the eyes of rating agencies and investors, Godongwana said both groups were used to budget impasses caused by coalition disagreements.
He noted that for them a credible budget was one that was sustainable.
Pieterse said they had spoken to rating agencies on the sidelines of the recent International Monetary Fund and World Bank Springs Meetings, and what they were concerned about was if fiscal goals could be met.
Godongwana subtly defended his original 2% VAT hike proposal arguing that he was trying to plug a R112 billion revenue gap that was to go above baseline spending over the Medium-Term Expenditure Framework.
He said baseline allocation over the MTEF was here to stay, which meant the most likely change was a cut in spending.
“While the postponement of the budget’s passage is not ideal, the circumstances leading to this decision have highlighted the importance of meaningful engagement on fiscal matters,” the minister said, noting that a new full consulting cycle would need to be put in place.
Consultations for the Mid-Term Budget Policy Statement are set to start in September, although that only leaves a month to its tabling in October.
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