Although the delay in the tabling of the 2025 Budget has impacted on policy certainty and the rand, the delay may be worthwhile if the Budget that is delivered on March 12 turns out to be truly committed to growth and job creation, as outlined in the recent Government of National Unity (GNU) Medium Term Development Plan, says North-West University School of Business and Governance's Professor Raymond Parsons.

“Between now and March 12, there should be an informed and reasonable debate about what fiscal options are available to South Africa to strike the right balance between spending, borrowing and taxing in ways that promote policy certainty and job-rich growth,” he emphasises.

Markets and financial research company Krutham MD and economic analyst Peter Attard Montalto says the postponement of the Budget “is a story of political, governance and process missteps overlayed on some great National Treasury policy-making and balancing work.

“This was a good budget with a fundamental political flaw at its heart,” he says.

The tabling of the Budget on February 19 had to be postponed after Cabinet failed to agree on a two percentage point increase in value-added tax (VAT), as proposed in the Budget documents. Political party the Democratic Alliance (DA), which is part of the GNU, had rejected the VAT hike plan put forth by the African National Congress, with DA leader John Steenhuisen having said the VAT increase would have broken the country’s back.

Parsons says the sharp controversy about the tax burden can be seen as symptomatic of the fact that economic growth in South Africa has been too low for too long, resulting in a shrinking tax base.

Montalto says there are, however, few options that will enable the country to deal with the fiscal constraints it is faced with.

“Some tax changes are possible – but there is no lever as big as VAT – the fuel levy freeze could be removed and more sin tax applied. The zero-rating basket expansion could be removed, though one wonders if this genie is out of the bottle now. All this would raise only R8-billion next year,” he illustrates.

Reserves in the budget could be narrowed somewhat and the primary path could be shifted from outperforming the Medium-Term Budget Policy Statement (MTBPS) to being in line with the MTBPS, thereby saving R12.3-billion next year.

“All this perhaps means that the real hole is about half next year, or R30-billion.”

Treasury staff chose the simplest lever, which was VAT, to present to the Minister. This is not where the error occurred, but what happened next that was the error, he avers.

Additionally, he says, Treasury staff should perhaps have foreseen the political challenges, “but it is their job to choose the easiest levers with the broadest tax base to deal with the expenditure and other choices Cabinet is making”.

Raising R60-billion from other taxes is difficult, if not impossible, given their respective tax bases and slippage potential.

“Treasury can, and will have, we believe, communicated clearly that the expenditure shape of what was going through into the Cabinet structures implied difficult tax choices. As such, we must give them the benefit of the doubt on this. They should have been given political direction early on in the process on what was viable,” says Montalto.

Meanwhile, University of the Free State Department of Economics and Finance chairperson Professor Johan Coetzee says the proposed two percentage point increase in VAT would have shifted the tax burden disproportionally to the poor.

“While my initial response of the postponement was frustration and disappointment, I soon realised that it is the outcome of a new government dispensation made up of many voices, and many dissenting at that, becoming more important. In principle, this is good for the nation, but unfortunate for us expecting the Budget to be read on the day.”

On balance, the decision to postpone is not as problematic as many have made it out to be over the past 24 hours. Clearly, there are many balls to juggle by Finance Minister Enoch Godongwana and many added complexities that have both national and international dimensions, he says.

However, in the lead-up to the Budget Speech, Godongwana would not take a firm stand on fighting the culture of non-compliance within State entities, which has invariably led to unsustainable levels of irregular expenditure.

The Auditor-General reported in the 2023/24 financial year that irregular expenditure totalled almost R50-billion, up from just over R27-billion on the previous year. This is approximately 2.2% of total government spending for the 2023/24 fiscal year, which has basically doubled since the previous year, and every preceding year before that, he highlights.

“The South African economy is not growing both enough and fast enough, with the most recent real GDP growth figure showed a decrease of 0.3% in the third quarter from the second quarter of 2024. South Africa's economy has struggled to achieve growth of 3% a year since the global financial crisis.”

The public-debt-to-GDP ratio for 2023/24 already exceeds 72%, which is higher than the generally accepted benchmark of 60% and almost 2.6 times what it was in 2008, at 27.8%.

This has resulted in the average interest on public debt approximating R1.1-billion a day, equating to about 22% of total tax revenues, or almost 20% of total government spending respectively.

Therefore, 20c for every R1 government spends is to pay the interest on the debt before any spending occurs on roads, education, infrastructure, social grants and the like. These are deeply concerning figures in an economy with already high levels of unemployment and inequality, Coetzee notes.

“However, the Budget postponement might be the beginning of something better. The GNU provides the platform to exploit the best that South Africa has to offer, as it promotes a broad-based and more inclusive political structure, which played itself out yesterday.”

Although the postponement could be interpreted negatively in terms of the GNU not being able to find common ground, it is a sign of more rigorous engagement and the enablement of a collaborative environment amongst parties in the decision-making structures of the State, he says.