{"id":813182,"date":"2025-02-20T06:53:46","date_gmt":"2025-02-20T04:53:46","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=813182"},"modified":"2025-02-20T10:42:41","modified_gmt":"2025-02-20T08:42:41","slug":"complete-madness-in-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/budget-speech\/813182\/complete-madness-in-south-africa\/","title":{"rendered":"Complete madness in South Africa"},"content":{"rendered":"\n

Krutham managing director Peter Attard Montalto said the budget speech debacle is a wake-up call to everyone in South Africa and a pathway to higher primary surpluses.<\/p>\n\n\n\n

Finance Minister Enoch Godongwana was set to deliver his 2025 Budget Speech on Wednesday, 19 February 2025, in the National Assembly.<\/p>\n\n\n\n

However, for the first time in democratic South Africa, the budget speech was cancelled to accommodate further deliberations within the Government of National Unity (GNU).<\/p>\n\n\n\n

The main sticking point was the planned two percentage point increase in value-added tax, which many cabinet ministers opposed.<\/p>\n\n\n\n

DA leader John Steenhuisen said the postponement of the Budget Speech was a victory for the people of South Africa because it prevented a 2pp VAT increase.<\/p>\n\n\n\n

He said the DA would now help introduce a new budget anchored in growing the economy rather than increasing taxes or debt.<\/p>\n\n\n\n

Patriotic Alliance leader and Minister of Sport Gayton McKenzie said the majority of cabinet members were against the budget.<\/p>\n\n\n\n

\u201cIt was us listening to each other without party political heads. The Finance Minister graciously took note of everything that was said,\u201d McKenzie said.<\/p>\n\n\n\n

The Finance Minister said the budget must \u201cstrike a balance between the interests of the public, economic growth and financial sustainability\u201d.<\/p>\n\n\n\n

He noted that the budget must be tabled before the start of the new financial year, but the law does make provision for exceptional circumstances.<\/p>\n\n\n\n

The cancellation caused chaos among the media and economists who planned their week around the 2025 budget.<\/p>\n\n\n\n

Later on Wednesday, the National Treasury announced that the 2025\/26 annual budget will be tabled on 12 March 2025.<\/p>\n\n\n\n

It added that National Treasury officials would not be providing comments or responding to queries related to the budget documents.<\/p>\n\n\n\n

The budget debacle caused the financial markets to contract, and the rand weakened significantly on Wednesday afternoon.<\/p>\n\n\n\n

Attard Montalto said it was a wake-up call to everyone, but the pathway to higher primary surpluses is intact through the self-induced madness. \u201cIn the end, that is all that matters,\u201d he said.<\/p>\n\n\n\n

Godongwana rolled the political dice and lost<\/strong><\/h2>\n\n\n\n
\"\"<\/a>
Finance Minister Enoch Godongwana<\/figcaption><\/figure>\n\n\n\n

Attard Montalto said Godongwana rolled the political dice and lost. \u201cHe should have known the 2% VAT increase was never viable,\u201d he said.<\/p>\n\n\n\n

He argued that the ANC and the ANC elements of the cabinet, more broadly, were largely on autopilot or asleep to the risks.<\/p>\n\n\n\n

The more profound question is why the Minister and President waited so late in the day before addressing the problem.<\/p>\n\n\n\n

The National Treasury was briefing people in lockup on a VAT increase whilst the cabinet was simultaneously blocking it.<\/p>\n\n\n\n

\u201cIt shows worrying and severe governance failures and internal ANC political failures within the cabinet system,\u201d Attard Montalto argued.<\/p>\n\n\n\n

\u201cThese have been there for some time but not exposed due to the prior single-party nature of government. This is what really matters here.\u201d<\/p>\n\n\n\n

Attard Montalto said this is an opportunity for something good if GNU processes can be strengthened and the ANC sees the DA threat of red lines as more credible.<\/p>\n\n\n\n

He does not see a risk to GNU stability from this debacle, given that a budget without VAT must be presented and that there are limited choices.<\/p>\n\n\n\n

The Finance Minister\u2019s position also seems safe. \u201cWe think the President will refuse to allow him to resign because of the lack of alternatives and its mid-G20,\u201d he said.<\/p>\n\n\n\n

\u201cThe President has refused Godongwana before on at least two occasions from stepping back before and after he became Finance Minister.\u201d<\/p>\n\n\n\n

Attard Montalto said the 2025 budget should never have gotten this far. \u201cWe understand it did despite numerous times the Minister was told it wasn\u2019t viable.\u201d<\/p>\n\n\n\n

\u201cBudgets can and do change a remarkable amount in the two weeks before as they complete political processes. This is quite normal, but never this late,\u201d he said.<\/p>\n\n\n\n

\u201cWe understand that the Minister has generally been disengaged, as he was at the MTBPS process until recently. Clearly, that did not help either.\u201d<\/p>\n\n\n\n

The VAT question<\/strong><\/h2>\n\n\n\n
\"\"<\/a>
Krutham managing director Peter Attard Montalto<\/figcaption><\/figure>\n\n\n\n

Attard Montalto said the 2025 Budget that wasn\u2019t tabled had a strong and conservative fiscal thread through it.<\/p>\n\n\n\n

The full documentation showed that the National Treasury is keeping the fiscal path clear, with a rapidly rising primary surplus and peaking debt next year.<\/p>\n\n\n\n

However, with a 2pp VAT increase off the table, it will be difficult to raise an additional R60 billion from other taxes.<\/p>\n\n\n\n

\u201cThere is no room whatsoever from any side for any compromise that involves VAT. This leaves a R60 billion hole each year,\u201d he said.<\/p>\n\n\n\n

Some tax changes to raise additional revenue are possible, but there is no lever as big as value-added tax (VAT).<\/p>\n\n\n\n

The fuel levy freeze could be removed, and more excise duties on alcoholic beverages and tobacco could be applied.<\/p>\n\n\n\n

\u201cThe planned zero-rating VAT basket expansion could be removed though one wonders if this genie is out of the bottle now,\u201d he said.<\/p>\n\n\n\n

These interventions would raise only around R8 billion per year, which is very far from the needed R60 billion.<\/p>\n\n\n\n

Reserves in the budget could be narrowed, and the primary path could be shifted from outperforming the MTBPS to being in line with the MTBPS, saving R12.3 billion next year.<\/p>\n\n\n\n

\u201cAll this perhaps means that the real hole is about half\u2014R30 billion\u2014next year. This is still large, and so requires real additional spending cuts,\u201d he said.<\/p>\n\n\n\n

Attard Montalto warned against pushing down the old \u2018anonymous\u2019 top trimming to provinces and municipalities. \u201cIt will just cause more falling over and stress at the sub-national level.\u201d<\/p>\n\n\n\n

Cutting infrastructure is easy but bad for growth and bad for the policy framework of supporting reform and private sector participation.<\/p>\n\n\n\n

He said there is limited room to manoeuvre, except expenditure cuts taking the bulk of the strain to cover that \u2018real\u2019 R30 billion hole.<\/p>\n","protected":false},"excerpt":{"rendered":"

Krutham managing director Peter Attard Montalto said the budget speech debacle is a wake-up call to everyone in South Africa.<\/p>\n","protected":false},"author":10,"featured_media":812935,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13716],"tags":[21799,18412,2563],"class_list":["post-813182","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-budget-speech","tag-finance-minister-enoch-godongwana","tag-krutham","tag-peter-attard-montalto"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/813182","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=813182"}],"version-history":[{"count":6,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/813182\/revisions"}],"predecessor-version":[{"id":813283,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/813182\/revisions\/813283"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/812935"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=813182"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=813182"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=813182"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}