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The third iteration of Budget 2025 delivered by Minister of Finance Enoch Godongwana today largely succeeds in absorbing a R69 Billion fiscal gap occasioned by dropping the proposed 0.5% VAT increase without defunding improved social and infrastructure spend altogether.

To some extent it’s a holding budget to settle months of instability since the first version of the budget was rejected in March. The real work lies ahead, in eliminating waste and reforming the budget-making process. 

Trade-offs between V1 and V3 of the budget were inevitable. It is unfortunate that spending on frontline services and infrastructure declines by R53 Bn to R180 Bn. Delaying some of the proposed spending on PRASA infrastructure is worrying. The “provisional” allocation of R12.3 billion for the rail signalling system upgrade needs urgent firming up.

⁠Deferring decisions on replacing the USA’s Pepfar Aids Relief funding is appalling. South Africa once had one of the worst responses to HIV / Aids treatment, and cannot risk lives by delaying funding.

The single most important element in Minister Godongwana’s speech was his commitment to a broad based expenditure review. He made a point of stating that this initiative had the support of the President, Deputy President and all members of the Cabinet.

“To be successful, our strategy of maintaining fiscal discipline while investing in growth demands that we prioritise high-impact expenditures. These are expenditures that deliver economic returns while eliminating inefficiencies, wastage and leakage that too often plague government’s spending.

“To tackle this, the National Treasury has undertaken expenditure reviews looking at more than R300 billion in government spending since 2013, with the aim of identifying duplications, waste and inefficiencies. We found potential savings of R37.5 billion over time through improved oversight and operational changes through these reviews. undergoes redesign,” Minister Godongwana said.

This is a critical first step towards Zero-Based Budgeting, for which the GOOD Party has advocated as a key element to achieve economic justice. Instead of adding a more-or-less inflationary percentage to last year’s budget items, the Zero-Based Budgeting approach allocates resources to meet priority needs.

It is regrettable that dropping the VAT increase from today’s version of the budget was accompanied by dropping the expansion of zero-rated basic foodstuffs. This is a setback for indigent families, and the budget’s failure to adjust for income tax bracket creep is a setback for the working class.

It is also regrettable that, while there was an increase to the old age grant, there were no increases announced for child and disability grants. Retaining the SRD Grant until next March buys time; the level of unemployment and poverty requires the State to find the means to fund a Basic Income Grant of a quantum sufficient to sustain life and dignity.

Increasing the fuel levy isn’t great because increased fuel costs lead to price increases of most goods and services, but the Minister had to raise additional revenue somewhere. He missed a beat by keeping sin tax tariff increases fairly low. There is a lot of scope to further raise the costs of tobacco and alcohol. 

A more creative-minded Minister may also have expanded sin taxes to cover such items as luxury motor vehicles and properties beyond a primary dwelling. Perhaps these are matters to be considered in the context of discussions around a wealth tax over the next year.

Issued by Brett Herron, GOOD Secretary-General