From confidence to chaos: the implications of South Africa’s unfolding Budget crisis

20 Feb 2025

Budgets and finance and money and our entire economy are about confidence. Now that this has happened, the last remaining genie of stability is out the bottle. This will now happen again and again, and it will cascade into provinces and councils.

A wriggle of iced jelly slithered and lingered down my back on Wednesday afternoon, 19 February 2025, as National Assembly Speaker Thoko Didiza announced that the Budget speech had been delayed.

Oddly, my first trigger was the phone call from an editor on the night Nhlanhla Nene was fired as finance minister in December 2015. That was such a shock, something that took us years to recover from.

This was shocking too.

Shocking not just in its enormity, but in its surprise. Sometimes events are given more power simply because they are unexpected. Floyd Shivambu leaving the EFF and going to uMkhonto Wesizwe party (MK) was a surprise.

But it didn’t matter. This does.

Confidence

And for the simple reason that budgets, finance, money and our entire economy are about confidence. And through all of the travails that started that night in December 2015, through the divisions in the ANC and the formation of a new coalition government, that budget process was never threatened.

Now that this has happened, that last remaining genie of stability is out the bottle.

This will now happen again and again, and it will cascade into provinces and councils.

In the Northern Cape the Freedom Front Plus now has the power to veto a budget proposed by the ANC. That means its sole member of the provincial legislature, Wynand Boshoff, a grandson of Hendrick Verwoerd, can decide whether a budget passes or falls.

In Gauteng the ANC may find itself being reliant on parties outside its coalition, such as the EFF or even MK, and who knows what could happen in KwaZulu-Natal.

The situation in councils and metros, with so many already failing, can only get worse when this becomes routine. This might well lead to an even deeper problem, as patronage just becomes an integral part of getting a budget passed.

As the hours passed and the shiver finally eased from the base of my spine, I was slightly bemused by the sanguine attitude of some analysts. “They will sort this out, it will be fine,” seemed to be the attitude of some.

I’m not so sure, I’m sorry to say.

The DA has now made the VAT increase a hill it will die on. It cannot, under any circumstances, now allow an increase in VAT. And other parties will join it, making sure their voices are part of the anti-VAT chorus.

Which means the National Treasury either has to get the money from somewhere else, or find places where it can cut spending.

And while the DA, some in the ANC, and other parties might well shout loudly about how a two-percentage-point hike in VAT was never politically feasible, the fact is that it is the Treasury that is stuck in the middle.

Yes, shouting may make you feel better, but it doesn’t find you R50-billion. This is why such a big VAT increase was so attractive in the first place. It is easy to enforce and almost impossible to evade.

Hard to replace

And this makes it very very hard to replace.

I have still more concerns.

It should have been clear to Finance Minister Enoch Godongwana that this simply could not happen. That the opposition would be intense, huge and political. And yet he clearly did not see it.

Is he that disengaged from the budget process? Is he not interested? Has he not read the room?

And after all of this, does he really want to remain finance minister? If this position is now too intense, if he is blamed for all of this, if he found yesterday’s post-non-budget press conference too humiliating, could this story still have a long way to go?

Then there is his relationship with South African Revenue Service Commissioner Edward Kieswetter. While Kieswetter is appointed by the president, a working relationship between him and the finance minister is vital. From Godongwana’s whispered but on-microphone comment in which he says “He is making me angry”, this may now no longer exist.

Read more: Hot mic: Godongwana gaffe reveals tax tensions with SARS commissioner

This is no one’s fault. When Kieswetter was asked his view on tax increases several weeks ago, he could not have known what Godongwana was planning when he said that tax increases would be counter-productive. But Godongwana should have known when Kieswetter first made the point that this was his publicly stated view.

Read more: Sars boss warns against tax hikes

There is a series of permutations that can now occur. Again, like the 2015 Nene shock, there are so many possible outcomes.

Then the big question was whether the ANC would overrule then president Jacob Zuma and insist that Des van Rooyen’s appointment be changed. In the end that is what happened. But the consequences of that moment still led to the breakdown of the relationship with Zuma and then ANC secretary-general Gwede Mantashe, and the formation of the movement that finally unseated Zuma in 2017.

Here some of the questions include whether the coalition survives, and if it has been forever changed by this. The DA will obviously be hoping that the ANC will now finally take it seriously, and no longer have its way on issues like the Bela Bill, the Expropriation Act and the NHI.

This could lead to a real change in the coalition, and the start of what could be called substantive coalition governance. This would involve all parties taking each other seriously.

Horse trading

For the moment of course, because the ANC and the DA together have roughly 60% of the vote, they can agree on what to do. But it will not always be like this, and it’s entirely possible that in five years time more parties are needed to pass a budget. And so budgets from now on could be the result of intense horse trading between partners.

While the optimists might think this will lead to better governance, actually it will just lead to more patronage. This will only make the decisions and trade-offs involved in planning a budget so much harder. And harder for everyone, whether it is an ANC finance minister now, or a finance minister from another party later.

Along with this, the secrecy with which a budget has previously been prepared, sacrosanct until this last weekend, is probably gone forever.

Stiff spines are going to be needed over the next few weeks and months. Spines immune to shivers and jelly. But even those with the stiffest of spines will have to concede, our budgets, and our politics, are going to be different now. DM

Categories:

Tags:

DM is much better if you are signed in...

South Africa

Confidence

Horse trading