South Africa has reached a critical tipping point, warned Professor Andre Thomashausen, a renowned expert in international law from the University of South Africa, following the postponement of Finance Minister Enoch Godongwana's Budget speech, originally scheduled for Wednesday, now rescheduled to March.
"If a Budget can no longer be agreed upon because public spending continues to spiral, the country will face another 20% drop in GDP, in addition to the same drop already since 2000. Ideology continues to be the reason for essential concessions being declared non-negotiable," he said.
Experts have cited a proposed 2% VAT increase as a possible reason for disagreement between the Government of National Unity (GNU) and the postponement of the Budget speech.
Professor Bonke Dumisa, an independent economic analyst, expressed his disappointment, saying, "It's really unfortunate that an issue over VAT caused the postponement of the Budget speech. It's really embarrassing how things played out. I believe that the ANC realised that any increase in VAT was going to be divisive, leading to the postponement of the budget speech." Dumisa further noted that the impact of VAT on the poor was a significant concern. "Those collecting the Social Relief of Distress grant of R370 would be paying the same increase in VAT, and there's no way that would be affordable for the poor. That is why the budget did not go ahead. The government is trying to raise VAT because they simply don't have money and are trying to avoid taking another loan."
Waldo Krugell, an economics professor from North-West University, added to the discussion by highlighting the policy uncertainty within the GNU. "Everyone is in agreement that there are limited resources for the Government to do what they need to do. There need to be trade-offs, and it's clear the GNU is not in agreement on those trade-offs. The process that brought this to postponement is just going to elevate uncertainty about the GNU and how committed they are to reforms that need to be made. This is not going to be good for the Rand and investment."
Thomashausen elaborated on the potential consequences, suggesting that if the South African motor manufacturing industry collapses due to the discontinuation of the African Growth and Opportunity Act with the U.S., irresponsible VAT increases, and unresolved municipal debts, unemployment could rise to 60%. "That will be the end of the South African dream and will not help anyone."
Political analysts from the University of KwaZulu-Natal, Siyabonga Ntombela and Zakhele Ndlovu, also weighed in. Ntombela suggested that the postponement might be linked to party disagreements on specific Finance Minister pronouncements. "These could be issues around taxes or budget allocations. Such disagreements are common under the GNU because parties want what will appeal to their constituency. There are no serious or major implications except for logistical and administrative expenses associated with organizing a seating of this magnitude."
Ndlovu pointed out specific policy disputes: "There are disagreements about the Bela Bill and the Expropriation Bill, and what I believe is a proposed VAT increase. It's clear the Government is trying to cut its Budget deficit by increasing VAT; unfortunately, GNU members were not in agreement due to the fact that it would punish the working class, and that is why there were objections. It wouldn’t be fair to punish the working class for the government's budget deficit."
Bennie van Zyl, the general manager of TLU SA, expressed concern over the economic implications for businesses, particularly farmers. "It increases economic uncertainty and complicates business for farmers. We view this as mismanagement that undermines investment confidence. We call on the Government to prioritise stability and investment-friendly policies."
Meanwhile, Rachel Bukasa, Executive Director of the civil society group Black Sash, voiced deep dismay over the situation.
"Black Sash is 'deeply appalled' by the political wrangling within the GNU that has led to the shocking postponement of the much-anticipated Budget Speech that was scheduled for today. The absence of this critical address leaves significant uncertainty regarding the allocation of resources to essential social assistance programs. While Black Sash supports the refusal of VAT increases, we disagree with the 11th-hour nature of the cancellation. The Budget Speech is not a mere formality; it is a lifeline for the poor, unemployed, elderly, and children who rely on social grants."
BUSINESS REPORT