President Cyril Ramaphosa has emphasised that the Government of National unity (GNU) will have to make certain “trade-offs” in a bid to find each other over differences about proposed measures to fund the National Budget.
This comes after finance minister Enoch Godongwana was unable to table the 2025 Budget Review last week after parties within the GNU opposed his proposal to increase value-added tax (VAT) by 2 percentage points from 15% to 17% in a bid to raise R58 billion for the fiscus.
The government is facing a fiscal crisis as the national debt is forecast to stabilise higher at 76.1% of gross domestic product (GDP) while the consolidated budget deficit will rise to 5% of GDP in 2024/25.
Debt-service costs, which consume 22 cents of every rand of revenue raised, are expected to peak in the current financial year and continue to decline thereafter.
Speaking during the Goldman Sachs 2025 South Africa conference on Thursday, Ramaphosa said the GNU has been holding firmly even though it has gone through a few very difficult challenges where ideological differences were very stark.
He said some issues that needed to be addressed and right now the GNU was in the throes of seeking to address the differences over the budget.
“I keep telling my colleagues and indeed South Africans that our differences are not fatal. There are governments that have fallen and broken apart over budgets and so this shows that we are a maturing democracy where there has to be consensus that should be built around the budget,” he said.
“So there are negotiations that are going on and I would say, a healthy form of negotiations, where we are beginning in many ways to look at the trade-offs.
“When you have a challenging fiscal situation that we have now, where your revenues have not gone to the levels that you wanted to fund a number of priorities or ambitions, you've got to do deals, you've got to do trade-offs and say what's important now and what can be done later and lay emphasis on growing the economy.
“But at the same time, do a balance and look after the interests of the people of South Africa where our unemployment rate is one of the highest in the world. And so maybe just coming to that in terms of priorities for the government, there's this jobs question which really touches on the other issues because obviously jobs, growth, poverty, it's all connected, but just focusing on jobs.”
Godongwana has postponed the tabling of the Budget to March 12 while he lobbies members within the GNU for support for the newly-proposed measures, including a wealth tax.
Cabinet on Thursday also reiterated that the postponement of the tabling of the Budget was a result of efforts by Cabinet to collectively address the nation’s funding challenges within a constrained fiscal environment.
“Cabinet assures South Africans that deliberations within Cabinet on the 2025 National Budget are continuing to determine the best ways to fund our national priorities and ensure the budget reflects the aspirations of all South Africans,” said Khumbudzo Ntshavheni, Minister during a post-Cabinet media briefing.
“The postponement, while it is the first in the history of South Africa, but not out of the norm in other jurisdictions, it is still within the provisions of the Public Finance Management Act.”
Meanwhile, Ramaphosa said what has been the main problem holding the country back from creating employment has been structural reforms that have not really been embarked upon for the longest time.
“We now have embarked on a number of reforms, particularly in our key network industries, the industries that really move and shape and shake the economy. For instance, electricity. For the longest time, our electricity architecture was really sort of one of the very old, old-fashioned ones and we've restructured that and created competition, particularly when it comes to generation,” he said.
“We're now looking at logistics and rail and our ports. Some of our ports used to be some of the best in the world and they declined over time and we're now rebuilding them, bringing in the private sector.
“So in electricity we're bringing in the private sector to generate and in the logistics we're doing exactly the same thing. The private sector is now going to play a key role and one of the overriding reasons is that the private sector has the money to invest, but we're making it more competitive as well because for the longest time there's been one monopoly that generates it and distributes electricity or transmits electricity.
“There's been one monopoly that runs our rail, that runs our port and we're loosening that monopoly entity's hands to be able to ensure that we get more participants and that in itself is going to bring in more investment, more innovation, more technology and we will be able to see our ports going to a higher level.”
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