South Africa’s 2025 budget faces scrutiny from lawmakers as a proposed VAT hike becomes contentious. Finance Minister Enoch Godongwana’s budget was mostly rejected, leading to concerns over legislative approval deadlines. Lawmakers have until April 3 to approve several budget-related bills, with implications for government spending and potential amendments. The ANC seeks political cooperation to pass the budget following a loss of its parliamentary majority.
In the coming weeks, South Africa’s lawmakers will closely examine the 2025 budget, considering potential amendments, particularly regarding a proposed VAT increase. This revised budget, presented by Finance Minister Enoch Godongwana on March 12, faced rejection from major parliamentary parties, despite a reduced VAT hike of 1 percentage point over two years. This situation has resulted in uncertainty about passing the budget before the fiscal year ends on March 31, marking a first in the post-apartheid era.
The budget process consists of three stages requiring lawmakers’ approval. The first stage involves voting on the fiscal framework and revenue proposals that define economic policy and government spending limits. The next stage concerns the division of revenue bill, detailing fund distribution among national, provincial, and local governments. The final stage is the appropriation bill, which allocates funds to specific departments and programs, with each bill needing approval before progressing.
Lawmakers have until April 3 (16 working days post-budget presentation) to approve the fiscal framework and revenue proposals, though some delays may be accommodated. Amending the budget is permitted within certain limits, and changes must align with revenue and spending estimates outlined in the budget.
If the budget isn’t approved by April 1, the start of the new fiscal year, the government may continue spending up to 45% of the previous year’s budget until the new version is ratified. However, new allocations require parliamentary approval.
The National Treasury has indicated that the VAT hike can be implemented starting May 1, regardless of whether the budget has passed. If the VAT increase is later revoked, necessary legal adjustments would occur within the next 12 months, without requiring tax repayment.
The situation poses a significant challenge for the ANC, which must collaborate with other parties to secure budget approval after losing its parliamentary majority. ANC Secretary-General Fikile Mbalula stated that the party aims to engage with all political groups to navigate budget passage. Godongwana is open to legislative proposals for adjustments, emphasizing the complexity of potential trade-offs involved.
The analysis of South Africa’s upcoming 2025 budget reveals a critical political maneuvering landscape, primarily influenced by a proposed VAT hike and the necessity for cross-party collaboration. With the budget needing timely approval under new fiscal timelines, the ANC faces the challenge of engaging other political factions, as delays could lead to significant governmental spending constraints. Ultimately, the outcomes of this budget review process may define the country’s economic policy direction and fiscal strategy moving forward.
Original Source: money.usnews.com
