The failure of the Government of National Unity (GNU) to resolve its differences over the budget is disappointing and negative for business sentiment, but it does show that the parties of the GNU are able to stand their ground and not rubberstamp ‘business as usual’ decision-making, Business Leadership South Africa (BLSA) has said.

“It is now critical that the GNU demonstrate that [standing its ground] leads to an improved outcome, a budget that they are united behind that delivers for economic growth. The delay is a shock to the public as well as investors here and abroad. Restoring confidence is the first priority,” BLSA CEO Busisiwe Mavuso said on February 19.

However, Business Unity South Africa (Busa) said the delay sent a negative message about the GNU's ability to collaborate effectively for the country's benefit and fulfil its crucial role in determining how national resources were allocated.

“This uncertainty is something we can ill afford. It should have been apparent much earlier that the parties in the GNU were struggling to reach an agreement on the budget, and the postponement should have been announced sooner to avoid compromising the credibility of the National Treasury,” Busa CEO Khulekani Mathe said.

However, as this is the first budget under the GNU, he noted that it was expected that the compilation and adoption processes would differ from those of the past.

Trade union Solidarity, meanwhile, was highly critical of Finance Minister Enoch Godongwana’s approach.

“[This] sends a clear message that the era of unilateral decision-making by the African National Congress (ANC) is over, and that cooperation and negotiation should now be at the core of policies. The audacity of . . . Godongwana to try to get approval for critical policies only on the day of the Budget speech is, however, indicative of a larger problem within the GNU,” Solidarity spokesperson Theuns du Buisson said.

The major point of contention was that Godongwana attempted to push through a two-percentage-point increase in value-added tax (VAT), from 15% to 17%, without consulting with the GNU partners beforehand.

“This lack of transparency and consultation [is] unacceptable and undermines the credibility of the government’s supposed collaborative nature. The events obviously also create the impression of internal friction and convey a message of uncertainty to the public as well as to the international community,” Du Buisson said.
 
He pointed out that South Africa was currently experiencing a diplomatic crisis and severe economic pressure. In such a context, a cohesive and functional government was of great importance.

“It is therefore essential that the ANC realise that it is no longer governing on its own. If the GNU is to be successful, Ministers must develop a mindset where precedence is given to consensus and cooperation. Similarly, all partners in the GNU must take their role seriously and must guard against any tendencies to abuse power,” Du Buisson said.

Despite the chaos, Mavuso said the fundamental requirements for the budget would not change between now and March 12, when a revised budget would be tabled.

“Government must balance its books. It must ensure it has the revenue to cover its expenditure. That takes hard choices that won’t go away. In making those choices, economic growth must be top of mind. To deliver that we need to show we are on top of our debt and focusing expenditure on growth-enhancing investment. Only growth can enable sustainable increases in government expenditure,” Mavuso said.

The South African Chamber of Commerce and Industry (Sacci) said it was concerned that the apparent lack of agreement by the GNU partners would lead to uncertainty and an inherent perception of political instability.

“We urge the political parties to bring a high level of maturity and seriousness in the negotiations, to get to an acceptable conclusion. We hope such a conclusion will not lead to an increase in any direct or indirect taxes at this time, as an increase in the costs of doing business will be retrogressive and detrimental to business confidence, economic growth and also worsen unemployment. The government must seriously explore options of cutting down on the fat and wasteful expenditure,” the chamber said.

However, BLSA was optimistic that government had spent the last four years restoring confidence of stakeholders that South Africa could escape a debt spiral that would have left the country with few options but a bailout from its creditors.

“It is critical that hard work is not undermined in the process of finalising the budget now. We must prioritise delivering on our promises that debt to GDP will peak in the near term and then head downward. We cannot undermine the fragile trust that global investors have regained in us,” BLSA said.

While National Treasury was rightly concerned that market-sensitive information must be handled appropriately, BLSA said it was essential for it to take the GNU into its confidence, with Cabinet members being responsible for protecting the information they were privy too.

“The members of the GNU share a responsibility to ensure the efficient development of the budget,” BLSA said.

“We urge all parties to prioritise the country’s needs over political interests and to use the additional time now available to Cabinet to develop a budget that focuses spending on programmes that promote economic growth. This is the only sustainable way to achieve a balanced budget without undermining our social spending programmes or harming the economy,” Mathe said.

“Any budget requires difficult decisions, and these must be guided by evidence on what decisions best support government’s objectives. Government must balance its books and do so under serious pressure created by the lack of economic growth and the legacy of misspending during the State capture era. It is critical that investors have confidence in government’s ability to manage its finances before they can put their capital at risk in backing long-term investments,” BLSA said.

“There is no getting away from the disappointment we as business feel over this delay. But I hope the GNU can urgently provide a clear way forward that business and investors can rely on. It must demonstrate maturity and acknowledge that trade-offs are inevitable but that there is a path that builds investor confidence and supports growth and that all parties in the government are 100% committed to it,” Mavuso said.

The Federation of Unions of South Africa (Fedusa) said in a statement on February 19 that it had consistently expressed concern over tax hikes that disproportionately affect workers and low-income households, especially amid the prevailing economic challenges, including a crippling cost of living crisis.

“We commend the government's commitment to transparency and inclusive dialogue, as evidenced by the decision to delay the budget presentation to achieve consensus among coalition partners. Fedusa remains hopeful that this period will allow for the development of equitable fiscal strategies that prioritise economic growth, job creation, and the welfare of all citizens,” the federation said.

Sacci assured that South Africa’s democracy was indeed maturing and that the delayed budget was not necessarily a sign of a failed State.

“As South Africans we should also avoid the self-created negativity of assuming our problems are unique, and we should exercise calm judgement and good stewardship. Failure to pass a budget on time is not an abnormal occurrence, as it happens in other advanced democracies of the world. [However], we call on those who are decision-makers to bring a level of diligence and speed to avoid uncertainty and rebuild confidence,” Sacci said.