At a special meeting held on March 3, Cabinet considered a variety of options to fund the 2025/26 Budget, the tabling of which was delayed for the first time ever following disagreements over a proposal to raise the value added tax (VAT) rate by two percentage points to 17%.

Following the meeting, Finance Minister Enoch Godongwana was mandated to select from the discussed options while also considering the following three issues: the country’s fiscal constraints; ways to mitigate the impact on poor and middle-income households; and ensuring that the Budget supports economic growth.

The statement issued after the meeting did not offer any details on the options debated, with media reports suggesting that these options could have included proposals such as a smaller VAT hike, various expenditure cuts and even a controversial proposal that the contributions to the Government Employees Pension Fund be withheld.

Documents released as part of the February 19 Budget lockup before the unprecedented delay to the tabling of the Budget, indicated that the proposed VAT hike would raise some R58-billion in additional revenue in 2025/26 even after the basket of zero-rated items was expanded.

The documents indicated that the revenue was required to close the gap left by lower-than-forecast revenue collections in 2024/25, as well as to fund early childhood development, retain teachers and other frontline workers, revitalise commuter rail and cover an expansion of the Social Relief of Distress Grant as required by a recent court ruling.

Under the proposal, government would achieve its goal of stabilising the debt-to-GDP ratio at 76.1% in 2025/26.

After the Budget was delayed President Cyril Ramaphosa set up a team of Ministers led by the Deputy President Paul Mashatile on February 24 to work with the Minister of Finance and the National Treasury to consolidate Cabinet inputs for further consideration.

“In compliance with the provisions of section 27 of the Public Finance Management Act (1 of 1999), Cabinet mandated the Minister of Finance to select from the discussed options and fund the Budget in a manner that takes into consideration: the fiscal constraints of the country; mitigates the impact on the poor and middle-income households; and supports 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 2025,” the statement read.