On the money: Finance Minister Enoch Godongwana needs to come up with funding to replace that withdrawn by the US. Photo: Jeffrey Abrahams/Gallo Images
After days of intense discussions, the cabinet says it has reached an agreement on how to address the R60 billion shortfall in Finance Minister Enoch Godongwana’s 2025 budget.
In an unprecedented move, Godongwana was forced on 19 February to delay delivery of the 2025 national budget until 12 March after the cabinet failed to agree on the measures he had proposed, chief among them a two percentage point increase in VAT.
A statement from the ministry in the presidency, issued late on Monday, said a resolution had been reached after a second special cabinet meeting held earlier in the day.
It said the cabinet had now given Godongwana the mandate to select from several options presented by a task team led by Deputy President Paul Mashatile to fund the budget in a manner that would take into account the country’s fiscal constraints, the effect of the poor and that would support economic growth.
“With the conclusion of the cabinet input process into the budget, the minister of finance and national treasury are now set to finalise the budget and table it before parliament on the 12th of March,” the government said.
The proposal to increase VAT faced strong opposition from partners in the government of national unity formed by President Cyril Ramaphosa after his ANC lost its parliamentary majority in last year’s general elections. Critics said it would have an adverse effect on South Africa’s lower-income households.
According to Sunday Times, during the first special cabinet meeting last week on the impasse, there was a suggestion to contain the VAT increase to 0.75 percentage points instead of two percentage points, but this still faced resistance, particularly from the Democratic Alliance (DA), which opposes any VAT hike.
Business Day reported that other alternatives included raising the fuel levy in line with inflation or implementing the DA’s proposed temporary suspension of employer contributions to the Government Employees Pension Fund, a measure estimated to save the treasury more than R60 billion for the 2025-26 financial year.