A ‘tough balancing act’, but there’s unhappiness inside and outside GNU over fuel levy increase

A “workable Budget”, a “tough balancing act” and “empty” were how some political parties described Budget 3.0, tabled on Wednesday by Finance Minister Enoch Godongwana at the Cape Town Convention Centre. It was dubbed Budget 3.0 as it was the third Budget since February.

While there was no VAT hike in this Budget, some parties expressed unhappiness about the increase in the fuel levy and the withdrawal of an added basket of goods from the zero-rated list, which would have been funded by the hike. 

Other parties said the Budget punished the poor and hampered the government’s ability to deliver services.

There were few disruptions as Godongwana spoke — a far cry from his previous two Budget Speeches. On 21 February, the tabling of the Budget was postponed after unhappiness within the Government of National Unity (GNU) over a proposed VAT increase of two percentage points.

On 12 March, Godongwana presented a Budget proposing a VAT increase of 0.5 percentage points in 2025/26 and another 0.5 percentage points in 2026/27. Through a protracted political and legal process, that Budget was withdrawn, and the whole procedure had to start over again.

When presenting Budget 3.0, Godongwana said that after being sent back to the drawing board, the recent weeks of talks, debates and compromises were tough but necessary.

“We have all gained a better, deeper appreciation of each other’s policy positions and which trade-offs each of us is willing to contemplate,” said Godongwana.

Enoch Godongwana shares a light moment with Acting President Gwede Mantashe during the 2025 Budget Speech on 21 May 2025. (Photo: Phando Jikelo / Parliament of SA)

Though political parties managed to block a VAT hike, they now face a new, unified challenge: a 4% inflation-driven increase to the fuel levy.

From 4 June, the price of petrol will increase by 16c per litre and diesel by 15c. The prices are increasing for the first time in three years, and the hikes were introduced to offset the lost revenue from the withdrawal of the VAT increase.

Minutes after the tabling, Inkatha Freedom Party (IFP) leader and Cooperative Governance Minister Velenkosini Hlabisa told Daily Maverick, “The Budget that has been presented by the minister is a good Budget and you must work within what is available.

“The truth is the additions [of goods to the zero-rated list] have been cut, which would have been a benefit for our country and our people, but what makes us more happy is that the frontline services were maintained — teachers will still get employed, as we wanted from the word go, [and also] the doctors, as well as the social grants [will remain],” he said.

The IFP was one of the few GNU parties that initially accepted a 0.5% VAT hike on the basis that it would assist with funding for programmes for nurses, doctors and teachers.

Read more: DA federal executive to meet over GNU while party heads to court over fiscal framework vote

Unfortunate area

However, Hlabisa added, “The only unfortunate area, the removal of the zero-rated food items, was going to be a great benefit to the poorest of the poor. The … increase of the fuel [price] is going to trigger the increase of prices, transport … but unfortunately, under prevailing circumstances, you need to work within what you have because the additional funding that was going to be available is no longer there.”

The Democratic Alliance’s finance spokesperson, Dr Mark Burke, said “it’s a workable Budget”, which the DA should be able to support.

The party, alongside the Economic Freedom Fighters (EFF), opposed the VAT hike in court, which proved pivotal in undoing Budget 2.0.

When asked about the party’s position on the withdrawal of items from the zero-rated VAT list and the increase in the fuel levy, Burke said, “I don’t want it to sound like I’m defending the removal of the VAT basket or increasing the fuel levy, but in the context of what could have been, I think it’s manageable and as part of the Government of National Unity, we do have a responsibility to try and find ways to be approachable, and that is the DA’s mission here — to be a reasonable, sober counterpart.”

Rise Mzansi leader Songezo Zibi said: “It’s a tough balancing act because every time you give up a revenue measure, you have to raise that money in other ways.”

The spokesperson for the uMkhonto Wesizwe (MK) party, Nhlamulo Ndhlela, said: “Well, let’s put it this way: this Budget is as empty as its President. It’s as absent as its President.

“The minister and his team are … lazy thinkers; you can’t grow an economy on an austerity-based Budget.

“This is just a Budget that is aimed at relieving the rich and punishing the poor, and that’s what’s happening with this GNU — they have no intent to grow this country and this economy, they have no intent to ensure that the rich subsidise the poor — instead it is the poor that continue to subsidise the rich.”

Earlier on Wednesday, the MK party revealed it had tabled a motion of censure in Parliament against Godongwana over his “chaotic” handling of the two failed Budget attempts.

MK PARTY TABLES MOTION OF CENSURE AGAINST FINANCE MINISTER AND CALLS FOR VOTE OF NO CONFIDENCE IN PRESIDENT RAMAPHOSA pic.twitter.com/CTZcE6FK1q

— uMkhonto WeSizwe Party (Official) (@MkhontoweSizwex) May 21, 2025

The MK party is part of the “Progressive Caucus”, which is in opposition to the GNU. Vuyo Zungula, from the African Transformation Movement (ATM), another member of the Progressive Caucus, told Daily Maverick, “I think the minister is taking an opportunity because he knows that the majority of the South African citizens, firstly, are going to be happy that there’s a Budget; secondly, there’s no VAT increase — they are most likely to accept anything.”

Government spending cuts

EFF spokesperson Sinawo Tambo was critical of cuts to government spending in Budget 3.0, noting that since the March version, more than R28-billion had been slashed from non-interest expenditure, with major reductions affecting education, healthcare, social development and the criminal justice system.

“These cuts are not marginal — they confirm a deliberate weakening of the state’s ability to deliver basic services at a time when unemployment, poverty and the collapse of public infrastructure are at their worst in democratic history. Reductions in frontline sectors such as basic education, healthcare and public safety expose the government’s growing detachment from the lived reality of the majority and its refusal to invest in people over spreadsheets,” he said.

Members of Parliament during Godongwana's 2025 Budget Speech on 21 May. (Photo: Phando Jikelo / Parliament of SA)

Cosatu’s parliamentary coordinator, Matthew Parks, welcomed several “progressive elements” in the Budget for which the federation had advocated, including the allocation of 61% towards social wage spending. However, he expressed disappointment over the lack of relief for the eight million recipients of the Social Relief of Distress grant.

Furthermore, the union was concerned that Godongwana did not foresee SA’s economic growth rising beyond 2% over the next decade.

“We desperately need at least 3% growth if we are to turn the corner on unemployment. We dare not normalise a 43.1% unemployment rate. This is a ticking time bomb that will one day explode, and the price of picking up the pieces will be far greater than we can afford,” said Parks.

The federation has urged Parliament and the government to begin a national dialogue on key expenditure priorities. This conversation should focus on what can be sacrificed, as well as identifying acceptable and unacceptable revenue streams to fund the priorities, said Parks.

“Whilst appreciating the scrapping of the VAT hike, we remain deeply distressed that for two years in a row, personal income tax brackets have not been adjusted for inflation. This will see workers at the margins of the next tax bracket in danger of paying higher taxes when receiving their annual increases. This trend must be reversed.

“Whilst regretting the decision not to extend VAT exemptions for additional food items or provide further fuel price relief, we urge government to pursue additional measures to cushion indigent households from poverty, in particular expanding free electricity and water,” said Parks. DM