Godongwana won’t table budget ‘without DA support’

Efficient Group economist Dawie Roodt believes Godongwana is unlikely to table the budget without guaranteed support from the DA.

The re-tabling follows weeks of political and legal turmoil over the proposed hike in value-added tax, which led to sharp divisions among the parties represented in the government of national unity.

Several parties rejected the initial proposal of a two-percentage-point increase and the revised 0.5% hike tabled in the second proposed budget.

Last month, the Western Cape High Court ruled in favour of the EFF and the DA, who challenged the proposed VAT hike and parliamentary resolutions from the National Assembly and National Council of Provinces that endorsed it.

READ MORE: EFF hosts VAT reversal ‘victory march’

The ruling forced the government to revisit the budget.

Roodt believes that the finance minister is unlikely to proceed again without securing the necessary political backing, particularly from the DA.

“I’m pretty sure this time around, he (Enoch Godongwana) will make sure that he has all the necessary support before he tables his budget. That’s one thing I’m sure about. The second thing is that I’m very sure that there will not be an increase in VAT because this whole thing happened because of the proposed increase in VAT.

“Apart from that, the normal issues still remain, and it is that the state cannot keep borrowing money, it needs to cut back on expenditure, and it is not politically easy to do,” Roodt sreaid.

He warned that government spending must be reduced to address growing fiscal pressures. 

After withdrawing the VAT hike, the Treasury faces a R75 billion revenue shortfall.

While various parties have suggested alternative revenue options, consensus remains elusive.

Roodt expressed concern about the broader economic impact of the political instability, saying the market has lost confidence in the state’s ability to manage public finances.

“I’m afraid that the reality is that the financial market lost a lot of confidence in this current government, what needs to happen now is that we need to get a credible budget and what really needs to happen is that politicians must now start to take very unpopular political decisions in order to really stable the state’s finances, and those political difficult decisions must the reduction of government expenditure,” he said.

He maintained his position in favour of a VAT hike, but only if it comes with relief from more damaging taxes. In his view, VAT remains one of the few sustainable tools left for the government to generate income.

The economist highlighted South Africa’s massive public sector wage bill, supporting more than 30 million people either directly or through dependents, as a key contributor to unsustainable spending.

“We need to reduce the wage bill, and we need to reduce the massive dependence on state enterprises as well,” he said.

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