Budget 3.0: Godongwana sets new date amid political turmoil and economic uncertainty

30 Apr 2025

At a hastily convened media briefing, Godongwana confirmed that the National Budget would now be tabled for a third time on 21 May 2025. The announcement follows two failed tablings: one blocked by legal action, the other torpedoed by coalition deadlock over the now withdrawn VAT increase.

Finance Minister Enoch Godongwana announced today that the third tabling of the Budget would take place on 21 May 2025, following two failed instances given inter-party conflict regarding the now recalled VAT hike.

At a hastily convened media briefing, Godongwana confirmed that the national Budget would now be tabled for a third time on 21 May 2025. The announcement follows two failed tablings: one blocked by legal action, the other torpedoed by coalition deadlock over the now withdrawn VAT increase.

“This decision was shaped not only by political debate, but importantly by the voices of South Africans,” said the minister without any apparent irony.

Alongside Director-General Duncan Pieterse, Godongwana described the decision to reverse the VAT hike as both pragmatic and democratic. The task now, he admitted, was to rebuild credibility in the eyes of the public, Parliament, and capital markets — without resorting to new borrowing or tax increases. The new Budget, he said, must be “saleable” to MPs and “credible” to investors.

While the controversial VAT climbdown may have granted temporary political cover, it has left behind a gaping R75-billion shortfall in the medium-term fiscal framework.

With the constitutionally mandated Budget deadline of 31 July now looming, the Treasury faces one of its most complex fiscal reengineering exercises in recent memory.

From stall, U-turn to restart

The legal architecture underpinning the Budget has now been reset; the high court order not only suspended the VAT hike, but also invalidated the parliamentary resolutions that had adopted the fiscal framework – meaning that a full reboot of the Budget needs to take place.

The 21 May retabling will encompass a full legislative reset: the Fiscal Framework, Appropriation Bill, Division of Revenue Bill, and the previously tabled Rates and Monetary Amounts Bill will all be presented to Parliament for fresh approval.

Until the new Budget is passed, government departments may continue to spend under Section 29 of the Public Finance Management Act up to 45% of last year’s Budget over the first four months, and 10% per month thereafter, so business will continue as normal for now.

The Treasury remains adamant that the Minister acted within his constitutional authority in initiating the VAT measure under Section 77. But in a multiparty government, constitutional authority means little without political consensus.

The failure to secure that consensus, both in the Cabinet and in Parliament, exposed the structural weakness of the Government of National Unity (GNU) — and the fragility of the fiscal machinery that supports it.

Minister Godongwana also responded to questions from the media regarding calls for his resignation — and almost as though he was merely returning from a failed first date, he placed the responsibility of the failed tablings squarely on politics, with coalition government being “uncharted waters”, stating that “all of this is new to us”.

How to balance without borrowing?

Pressed on the Treasury’s plan to fill the funding gap, he confirmed that no further tax increases were being considered and that the state would not borrow additional funds: “We already spend more than a billion rand a day servicing debt.”

Instead, the Treasury would focus on improving spending discipline across departments, improving revenue collection and structural reform to stimulate investment and unlock growth — though how exactly this would occur was not discussed, but will hopefully arrive come 21 May.

“The credibility issue will arise on the final product,” Godongwana warned. In other words: there are no more passes for the process. The test will be whether Budget 3.0 actually delivers.

A coalition built from sand

Godongwana described the current budgetary environment as “uncharted territory”.

“We’ve learned the hard way,” he said, announcing that a more formalised pre-Budget consultation process would be established by September — prior to the Medium-Term Budget Policy Statement (MTBPS).

The Treasury also confirmed that all legal and technical protocols — including formal consultations with the Financial and Fiscal Commission and GNU political parties — would precede the 21 May tabling.

Market patience is running out

Responding to questions about fiscal credibility, Pieterse reiterated what investors had told the Treasury at the International Monetary Fund spring meetings in Washington: “Fiscal credibility is judged by our ability to meet the fiscal goals we’ve set for ourselves.”

Both the Treasury and the minister emphasised that reversals alone did not undermine investor trust — but failing to meet declared targets would. The credibility of Budget 3.0 would be judged by delivery.

The Treasury said the revised framework would preserve South Africa’s debt stabilisation trajectory, despite shifting assumptions and reprioritised allocations.

Fallout: VAT

Small businesses, accountants, and software vendors, retailers, banks — every South African business had scrambled to implement VAT changes in early April — only to reverse them days before implementation. The cost of the Treasury’s back-and-forth is already being felt on the ground.

Godongwana declined to specify where expenditure cuts or reprioritisations might fall, joking: “I must have something I can brag about on the 21st.”

Asset sales remain off the table for now, while UIF and skills levies are legally ring-fenced. But the debt service burden continues to grow, now absorbing more than R1-billion daily — money that could otherwise be spent on essential services.

What this means for you

If you run a small business, expect continued uncertainty around invoicing, pricing, and payroll taxes until Parliament finalises the framework. The Treasury has declined to offer clarity on VAT or PAYE enforcement changes in the interim.

If you’re employed, wage growth and public sector hiring will probably remain frozen — particularly in health and education — until the Treasury confirms which line items face reprioritisation.

If you’re a consumer, borrowing costs are unlikely to fall. With debt service eating more than R1-billion a day, South Africa’s risk profile has ticked upward, pushing back the timeline for any interest rate cuts.

Any further Budget deadlocks could delay infrastructure projects, grant adjustments, or allocations to overburdened clinics and schools.

Until 21 May, uncertainty, not legislation, governs the economy.

The final hurdle

Godongwana ended the briefing with a candid appeal: “We have to ask as a nation — should we really be spending over a billion rand a day on debt service?”

The VAT U-turn may be behind us, but its consequences are not. The fiscal credibility of the state, the legitimacy of the GNU, and the economic confidence of millions now rest on the success — or failure — of Budget 3.0.

Should we miss the runway on 21 May, the fallout won’t just be economic — it will be constitutional. DM

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