Budget Speech
By Thobeka Makume
Finance Minister Enoch Godongwana is set to deliver the 2025 Budget Speech on Wednesday, 12 March 2025, following comprehensive Cabinet discussions to address the nation’s fiscal challenges.
Cabinet’s Intensive Deliberations
The Government Communication and Information System (GCIS) released a statement on Tuesday, 4 March 2025, detailing the outcomes of a special Cabinet meeting held on Monday. This meeting focused on exploring viable options to fund the 2025/26 financial year’s budget and medium-term fiscal plans. This session followed an earlier special meeting on 24 February 2025, where broad discussions addressed the country’s fiscal constraints and the urgency of implementing the three key priorities of the seventh administration under the Government of National Unity.
In the 24 February meeting, President Cyril Ramaphosa appointed a ministerial team led by Deputy President Paul Mashatile to collaborate with the Finance Minister and the National Treasury. Their mandate was to consolidate Cabinet inputs for further consideration. This team presented various options, which were thoroughly evaluated by the Cabinet. 
Mandate to the Finance Minister
Adhering to section 27 of the Public Finance Management Act (1 of 1999), the Cabinet authorized Minister Godongwana to select from the discussed options. The directive emphasizes considering the nation’s fiscal constraints, mitigating impacts on poor and middle-income households, and supporting economic growth. With Cabinet’s input finalized, the Finance Minister and National Treasury are preparing to present the budget to Parliament on 12 March 2025.
Budget Postponement and Underlying Challenges
The 2025 Budget Speech was initially scheduled for 19 February 2025 but was postponed due to internal disagreements within the coalition government. This unprecedented delay stemmed from disputes over proposed fiscal measures, notably a suggested 2% increase in value-added tax (VAT) from 15% to 17%. The African National Congress (ANC) advocated for the VAT hike to generate approximately R58 billion in additional revenue for the 2025/26 fiscal year. However, coalition partners, particularly the Democratic Alliance (DA), opposed the increase, citing concerns over its potential adverse effects on the economy and the financial burden on citizens.  
Economic Context and Fiscal Projections
South Africa’s economic landscape presents significant challenges. The latest budget review forecasts wider budget deficits and rising debt over the next three years, despite improved economic growth prospects owing to better electricity supply. The consolidated deficit for the fiscal year ending March 2025 is projected at 5.0% of GDP, higher than the 4.5% forecasted in February. The budget deficit for the next fiscal year is now anticipated at 4.3% of GDP, up from a previous estimate of 3.7%. 
Gross debt is forecasted to stabilize at 75.5% of GDP by 2025/26. Economic growth is now estimated at 1.1% for 2024, down from 1.3% earlier, and at 1.7% for 2025. Improved investor confidence and suspension of power outages are seen as positive indicators, although logistics challenges persist. 
Coalition Dynamics and Governance
The formation of the Government of National Unity (GNU) introduced complexities in policy formulation and implementation. Divergent views among coalition partners have led to debates on critical fiscal policies, reflecting the inherent challenges of coalition governance. President Ramaphosa acknowledged these dynamics, emphasizing the importance of consensus-building and transparent deliberations to uphold democratic principles. 
Anticipated Budget Focus Areas
The forthcoming budget is expected to address several key areas:
1. Revenue Generation: With the VAT increase proposal facing opposition, alternative revenue streams are under consideration. These may include adjustments to other taxes, accessing reserve accounts, reducing spending, or increasing debt issuance.
2. Expenditure Management: Efforts to curtail public spending without hindering essential services are anticipated. This includes evaluating and potentially reducing non-essential expenditures to align with fiscal realities.
3. Economic Growth Initiatives: Strategies to stimulate economic growth, such as infrastructure development and private sector investment, are likely to be prioritized. The government aims to transform public sector infrastructure by increasing private sector involvement and exploring alternative financing options.
4. Social Support Programs: Maintaining and potentially enhancing social support mechanisms to protect vulnerable populations during economic adjustments will be a critical focus.
Stakeholder Reactions and Market Implications
The budget postponement and internal government disagreements have elicited varied reactions:
• Financial Markets: The delay led to a weaker rand against the U.S. dollar, reflecting investor concerns over fiscal stability.
• Business Community: Organizations like the Black Business Council have expressed apprehension that the postponement could create investor uncertainty, potentially impacting economic growth and employment.
• General Public: Citizens and civil society groups have voiced concerns about potential tax increases and their implications on the cost of living, particularly for low- and middle-income households.
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