Godongwana’s Budget Speech looms after US funding loss and coalition standoff

Godongwana

Cape Town – Finance Minister Enoch Godongwana is set to present the national budget on Wednesday March 12, 2025, following a postponement due to internal disagreements within the Government of National Unity (GNU).

The budget speech, initially scheduled for February 19, 2025, was unprecedentedly cancelled due to disputes among coalition partners over proposed tax hikes, particularly a two-percentage-point increase in Value-Added Tax (VAT) from 15% to 17%.

The Democratic Alliance (DA), a significant coalition partner, opposed the VAT hike, suggesting alternative measures like selling port concessions and implementing cost-cutting strategies to address the R60 billion fiscal deficit.

The fiscal deficit has been exacerbated by external factors, including the cessation of US funding for HIV/Aids programs under President Donald Trump, Financial Times reported.

This funding cut has added pressure on the already strained national finances, necessitating urgent political decisions to stabilise the economy without further increasing the national debt, which has risen to nearly 75% of GDP.

The budget impasse has impacted financial markets.

According to Reuters, the South African rand weakened slightly, trading at 18.30 against the dollar, as investors remained cautious ahead of the budget announcement.

“While its (the rand’s) trade today is consistent with broader moves in the emerging market FX (foreign exchange) space, it may begin to trade with a slightly more idiosyncratic flavour as the week progresses,” the report quoted Danny Greeff, co-head of Africa at ETM Analytics, as saying.
“This is due to the fact that Finance Minister Godongwana will be presenting the government’s budget on Wednesday, which is a structural driver of the rand, given past fiscal decay and recent attempts to steady the ship.”

Additionally, the Johannesburg Stock Exchange’s Top-40 index experienced a 0.3% decline, reflecting market apprehension.

Government’s stance

In response to the deadlock, Godongwana emphasised the need for a budget to “strike a balance between the interests of the public, economic growth and financial sustainability”, BusinessTech reported.

He added: “If you ask me as a finance minister, I like the exercise. It forces some of the things we have not been doing — to discuss trade-offs. In that sense, the cabinet itself is becoming engaging.

“A budget is a statement of the cabinet, and when the cabinet becomes involved in detailed discussions, it’s useful for us.”

As the new budget date approaches, all eyes are on the GNU’s ability to navigate these fiscal challenges and present a budget that addresses the nation’s economic needs while maintaining political cohesion within the coalition government.

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Compiled by Betha Madhomu

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