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IOL News
20-05-2025
- Business
- IOL News
‘We cannot have a third budget failure' — Economist warns as Godongwana faces GNU showdown
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. IOL Politics
IOL News
24-04-2025
- Business
- IOL News
DA continues court challenge against VAT increase despite settlement offer
The Democratic Alliance will continue with its application to have the power given to Finance Minister Enoch Godongwana to decide on VAT without ratification of Parliament declared unconstitutional. Image: Armand Hough / Independent Newspapers DA Federal Council chairperson, Helen Zille, said on Thursday her party will proceed with its legal challenge regarding the constitutional validity of Finance Minister Enoch Godongwana's powers to raise VAT despite the latter's out of court settlement offer. Speaking to the media in the morning, Zille said the Part B application would move forward, regardless of any out-of-court settlement discussion with Godongwana. She said the power to raise tax was conferred to the Parliament, not the minister. 'Only Parliament can raise taxes. It is a power that can't be delegated to a minister. We will continue with Part B of our application,' she said. Zille also said the DA has yet to receive formal settlement out of court settlement offer from Godongwana. 'The minute we see it, we will know what he is asking for and what we will not do is not to withdraw Part B of our application. It is important get to the order of the court that only Parliament can raise taxes,' she told the journalists. Godongwana announced his decision to introduce the Rates and Monetary Amounts and the Amendment of Revenue Laws Bill, which proposes to maintain the Value-Added rate at 15 per cent from 1 May 2025, instead of the proposed increase to VAT announcement in the Budget in March, two days after the court heard an application by the DA and EFF. Godongwana said the decision to forego the increase followed extensive consultations with political parties, and careful consideration of the recommendations of the parliamentary committees. 'By not increasing VAT, estimated revenue will fall short by around R75 billion over the medium term. As a result, the Minister of Finance has written to the Speaker of the National Assembly to indicate that he is withdrawing the Appropriation Bill and the Division of Revenue Bill, in order to propose expenditure adjustments to cover this shortfall in revenue.' National Treasury said Parliament will be requested to adjust expenditure in a manner that ensures that the loss of revenue does not harm South Africa's fiscal sustainability. 'The decision not to increase VAT means that the measures to cushion lower income households against the potential negative impact of the rate increase now need to be withdrawn and other expenditure decisions revisited. 'To offset the unavoidable expenditure adjustments, any additional revenue collected by SARS may be considered for this purpose going forward.' The National Treasury said it will consider the proposals put forward as potential amendments in upcoming budgets as mechanisms to increase the resources available. While the national Treasury's statement was mum on the proposed out of court settlement with the DA, Zille said it came as a surprise very late last night on Wednesday their lawyers informed her they had been approved for a settlement offer by Godongwana's lawyers. She said it was less than a week Godongwana stated in the answering affidavit that the would increase the VAT on May 1. 'What happened between last Thursday and yesterday was DA challenge heard in court on Tuesday… I have no doubt his legal team went to him yesterday to say it looks inevitable the VAT increase could well be set aside by the court,' she said. Zille also said her party would check for necessary spending reviews. 'There is still quite a battle to run from this point onwards.' She said they expected Godongwana to make a formal out of court settlement offer and they will respond through their lawyers. Zille also noted that there was no precedence to their court case. 'We believe a court can set aside Parliament's acceptance of fiscal framework if it was unlawful and irrational,' she said, adding that they did not know which path was to be followed. "There were two main respondents in our case. Number one was the minister and obviously the National Treasury and two was Parliament,' she said. 'We have to seek a settlement agreement with both before we can say we have beaten this VAT increase. So it's important for us to say that while victory is a nose length away, we still have to cross the finishing line," Zille said. Asked about the DA's stay in the Government of National Unity, Zille said it was not her position to say under what circumstances the GNU should continue. 'I can't categorically answer now. A lot will depend on what happens today.' Zille also said the ANC, which held its press conference with smaller parties that voted for the fiscal framework, cancelled their meeting that was scheduled for 11am.
