‘We cannot have a third budget failure' — Economist warns as Godongwana faces GNU showdown

IOL News

20-05-2025

Pressure is mounting on Finance Minister Enoch Godongwana as he is expected to table the National Budget Review for the third attempt in Parliament on Wednesday after tensions within the Government of National Unity coalition over an increase in value-added tax (VAT) rates led to the budget being amended and re-tabled three times.
Image: File
Finance Minister Enoch Godongwana is under pressure to ensure his 2025 budget wins the support of Government of National Unity (GNU) partners, with an economist warning that the country cannot have a situation where a third budget is not passed.
Godongwana is scheduled to table his budget speech on Wednesday.
This comes after the rejection of two previous budget proposals and the recent decision to scrap a planned increase in Value-Added Tax (VAT), placing even more strain on the National Treasury to find alternative ways to address South Africa's growing fiscal crisis.
Speaking to IOL News, Professor Jannie Rossouw of the Wits Business School emphasised the importance of passing the upcoming budget.
'The big thing is, we can only hope that this budget will go through Parliament,' Rossouw said.
'It's problematic that the previous two budgets were not approved by Parliament. The credibility of both the Finance Minister and the National Treasury has been damaged.'
Rossouw said that Godongwana must ensure the budget has the backing of the GNU partners before it is tabled in Parliament.
'I can only hope that he negotiated the budget with the GNU partners and that they agreed to it before it's presented,' Rossouw said.
'We cannot have a situation where a third budget does not pass. That does not instill confidence in the government's ability to run the economy.'
Video Player is loading.
Play Video
Play
Unmute
Current Time
0:00
/
Duration
-:-
Loaded :
0%
Stream Type LIVE
Seek to live, currently behind live
LIVE
Remaining Time
-
0:00
This is a modal window.
Beginning of dialog window. Escape will cancel and close the window.
Text Color White Black Red Green Blue Yellow Magenta Cyan
Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan
Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan
Transparency Transparent Semi-Transparent Opaque
Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps
Reset
restore all settings to the default values Done
Close Modal Dialog
End of dialog window.
Advertisement
Next
Stay
Close ✕
The first budget, originally set for February, was postponed amid disagreements within the GNU over the proposed VAT hike.
A revised version, introduced in March, suggested staggered increases of 0.5 percentage points but was met with strong opposition from coalition partners, especially the Democratic Alliance (DA), including parties outside the GNU.
The Western Cape High Court later blocked the proposal.
The Economic Freedom Fighters (EFF) also challenged the VAT hike in court.
With limited options, Godongwana faces the difficult task of bridging the funding gap while satisfying all members of the GNU.
Rossouw said the budget is likely to include deep spending cuts.
'In my view, it will be necessary to cut some expenditure, because the government cannot currently raise taxes,' he said.
'And I can think of several instances where expenditure can be cut without harming service delivery to the average South African.'
Among Rossouw's suggestions, is eliminating all 43 deputy ministers, which is a demand echoed by several political parties in light of the bloated GNU.
'I don't know what deputy ministers do or why we need 43 of them. Simply get rid of them,' he said.
He also called for the closure of underperforming departments.
'Simply close certain government departments that achieve very little, like the Department of Small Business Development. It has not developed even one small business in the eastern part of South Africa.'
Rossouw also criticised what he called wasteful expenditure, including the presidential motorcade.
'Why do we need 11 vehicles and several motorbikes in the presidential motorcade?… It's unnecessary.'
He further pointed out the financial drain of state-owned enterprises, especially the South African Airways (SAA).
'I said a decade ago that the government must give SAA away. It will not fly…The government has this strange ideological idea that it needs to be aligned with these enterprises, but we're now paying the price.'
However, Rossouw said he believes the budget can only pass if it has the necessary political buy-in.
'One thing I want to see in this budget is a clear plan to stimulate economic growth,' he said.
'We need faster economic growth to get the country's unemployment crisis under control.'
'We really need to start thinking outside the box. We urgently need to get the economy going,' he added.
[e-mail]
IOL Politics