South Africa’s lawmakers will review the 2025 budget, which includes a debated VAT hike. The budget faced rejection from major parties despite a reduced VAT increase. Lawmakers have three stages to consider the budget until April 3, and failure to pass it by April 1 could lead to continued spending based on the previous year’s budget. The ANC is seeking bipartisan support to navigate this significant challenge.
In the upcoming weeks, South Africa’s lawmakers will critically assess the 2025 budget amidst a contentious proposal to increase value-added tax (VAT). Finance Minister Enoch Godongwana presented a revised budget on March 12, which faced rejection from major political parties, despite reducing the VAT increase from two percentage points to one. This situation marks a historic moment in the post-apartheid era, as there is no assurance for the budget’s approval before the current fiscal year concludes on March 31.
The budget review process involves three stages. Initially, lawmakers will vote on the fiscal framework and revenue proposals, which define economic policy, revenue forecasts, and government spending limits. Subsequently, they will deliberate on the division of revenue bill, detailing fund allocation among national, provincial, and local governments. Lastly, the appropriation bill will determine funding distribution to specific departments and initiatives. Lawmakers have until April 3, or 16 working days post-budget tabling, to ratify the fiscal framework, with some leeway for delays.
Should the budget fail to pass by April 1, the onset of the new fiscal year, the government is authorized to spend up to 45% of the previous year’s budget until a new budget is sanctioned; however, they cannot initiate new spending without parliamentary consent. The National Treasury has indicated that the VAT hike could commence on May 1, irrespective of the budget’s passage, contingent upon ministerial announcement and lasting for 12 months.
In light of the budget situation, the African National Congress (ANC), which lost its parliamentary majority last year, must seek support from other political entities. Secretary-General Fikile Mbalula stated the ANC is open to discussions with all parties to facilitate budget passage. Minister Godongwana has also expressed willingness to consider budget amendments but has highlighted the complex trade-offs involved.
The imminent review of South Africa’s budget, including a contentious VAT hike, poses significant implications for its economic landscape. With a historic challenge of passing the budget before the fiscal year ends, lawmakers are navigating a complex political terrain. The ANC’s call for collaborative discussions emphasizes the need for consensus among political parties to address fiscal challenges effectively. Ultimately, the outcome of this process will shape the governance and economic policies in the coming year.
Original Source: www.tradingview.com
