Budget Postponement
By Thabo Mosia
Finance Minister Enoch Godongwana has assured that the postponement of South Africa’s 2025 Budget Speech, due to internal disputes within the Government of National Unity (GNU) over a Value-Added Tax (VAT) increase proposal, will not impact the country’s engagements at the upcoming G20 meetings.
Speaking at a press briefing on Wednesday, 19 February 2025, Godongwana dismissed concerns that the budget delay could weaken South Africa’s economic credibility, stating that G20 nations have their own domestic challenges and will not be affected by South Africa’s fiscal debates.
The budget postponement coincided with another G20 gathering set to take place on Thursday, where foreign ministers from G20 nations will meet to discuss global economic trends, trade, and financial policies. Next week, finance ministers and central bank governors will gather to discuss the state of the global economy—a platform where South Africa’s budgetary plans would typically be a point of discussion.
Budget Postponement Sparks Debate Over VAT Increase
The decision to postpone the Budget Speech to 12 March 2025 comes amid disagreements within the GNU government over the proposed increase in VAT from 15% to 17%. The proposal, which is aimed at increasing government revenue to fund social welfare and infrastructure projects, has met resistance from the Democratic Alliance (DA), a key coalition partner in the GNU.
DA leader John Steenhuisen confirmed that VAT was one of the main points of contention that led to the delay. He argued that raising VAT would place a heavy burden on consumers, particularly low-income households that are already struggling with high living costs.
“We cannot support a VAT increase that would break the back of our economy and disproportionately affect the poor,” Steenhuisen stated.Despite these concerns, the African National Congress (ANC) and several other coalition partners believe that an increase in VAT is necessary to stabilise the economy, boost revenue collection, and fund service delivery programs.
Godongwana: ‘No G20 Impact Despite Budget Delay’
Addressing concerns about how the budget delay could affect South Africa’s economic reputation, Godongwana dismissed any fears of repercussions at the G20 meetings.
“I don’t think it’s likely to do anything to G20. These people that are going to be here, they’ve got their own problems.”Godongwana emphasised that the budget postponement is a domestic issue and will not affect international economic cooperation or South Africa’s role in G20 discussions. He also reassured investors that the country remains committed to fiscal responsibility and will present a credible budget on 12 March.
Minister in the Presidency Khumbudzo Ntshavheni backed Godongwana’s stance, stating that the budget dispute was not a party-political disagreement but rather a policy issue among Cabinet ministers.
“We are all ministers of the government. We share a common concern about the impact of the budget in terms of achieving our priorities and protecting the poor,” Ntshavheni explained.Financial Market Reaction and Economic Uncertainty
The postponement of the budget has introduced a degree of uncertainty in financial markets, with the South African rand experiencing a slight depreciation following the announcement.
📉 Rand Performance Post-Announcement:
• The rand weakened to R18.565 against the US dollar, a 0.9% decline from the previous close.
• Investors reacted cautiously to the delay, with some expressing concerns over policy uncertainty in the GNU.
• South Africa’s bond yields rose slightly, reflecting increased investor caution.
Market analysts suggest that while the delay itself is not a crisis, ongoing disputes within the GNU raise concerns about South Africa’s ability to manage fiscal policy effectively. Investors are looking for assurances that the budget, once tabled, will align with global economic expectations and maintain fiscal discipline.
Political and Parliamentary Responses
The budget postponement has drawn mixed reactions from political parties and Parliamentarians.
🔹 Parties that supported the delay:
• ANC, IFP, GOOD, and smaller coalition partners welcomed the delay, arguing that the budget needs further refinements before being tabled.
• They emphasised the importance of balancing tax policies to ensure economic growth without harming consumers.
🔹 Parties that opposed the delay:
• The DA, EFF, and ActionSA strongly criticised the postponement, calling it a sign of poor governance and a failure of leadership.
• EFF spokesperson Sinawo Tambo described the postponement as “proof that the GNU is collapsing under its own contradictions.”
📢 Opposition MPs also expressed frustration, stating that Parliament was denied its constitutional right to debate, accept, or reject the budget on time.
“Parliament cannot be dictated to by the Executive. The budget should have been tabled as scheduled, allowing MPs to engage in debate rather than postponing key financial decisions.” – Opposition MP statementUpcoming G20 Meetings: South Africa’s Role
Despite domestic fiscal tensions, South Africa will play a significant role in the upcoming G20 discussions.
📅 Key Upcoming G20 Events:
• 22 February 2025: G20 Foreign Ministers Meeting in New Delhi, India
• 24-25 February 2025: G20 Finance and Central Bank Deputies Meeting in Cape Town, South Africa
• 26-27 February 2025: G20 Finance Ministers and Central Bank Governors Meeting in Cape Town
South Africa remains an important player in global economic discussions, especially regarding:
• Emerging market economies and debt sustainability
• Climate finance and green investment strategies
• Reform of international financial institutions
• Trade policies affecting developing countries
The G20 Summit, set for November 2025, will be a crucial moment for South Africa to showcase its economic strategies and fiscal direction.
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