In an unprecedented move since the dawn of democracy in 1994, the South African government has cancelled Finance Minister Enoch Godongwana’s 2024/2025 budget speech due to policy disputes within President Cyril Ramaphosa’s Government of National Unity (GNU).

The governing African National Congress (ANC) and its grand coalition main partner, the Democratic Alliance (DA), could not agree on the proposed 2% increase in the Value-Added Tax (VAT) from the current 15% to 17%. 

The postponement, announced during a Parliamentary sitting in Cape Town on Wednesday, February 19, has exposed policy fractures within the 10-party grand coalition cobbled together after the May 2024 general elections. 

The budget speech will now take place on March 12. The budget delay led to uncertainty, currency volatility, and bond market pressure, with the value of the South African rand slightly dropping against the US dollar—from R18.33 to R18.58. 

National Assembly Speaker Thoko Didiza had a tough task trying to explain the rationale behind the cancellation, with parties such as the Economic Freedom Fighters (EFF), uMkhonto we Sizwe (MKP) and African Transformation (ATM) saying it was evidence of government collapse. 

While no one in the house exactly said why the budget speech was cancelled, the National Leader of the DA, John Steenhuisen, also the Minister of Agriculture, told the media that the most contentious issue was the ANC’s decision to hike VAT by 2%. He said other GNU parties were opposed to the move.

Steenhuisen said they could not rubber stamp a budget where South Africans would have to cut back on essential goods needed daily because of a higher VAT. He also said they could not support a budget that would not yield economic growth for the country. 

“VAT was, of course, one of the matters and I think that has been played out in the media over the last weeks, and it obviously was a very tipping point for me if I wear a hat as leader of my party. Very clear from my party, we couldn’t with a very clear concise support two percent VAT increase given the current economic circumstances in South Africa,” Steenhuisen said. 

EFF President Julius Malema said the postponement was proof that the GNU had “collapsed”. 

He said Godongwana should have delivered his budget so that Parliament could debate it. Malema insisted that Didiza’s decision to cancel the budget speech had rendered Parliament “useless.”

“You cannot come here and say, confidently, that the parties in the executive are not agreeing. What is that? We don’t have parties in the executive. We have got the executive. The executive must come here, and present the budget, and this Parliament must decide whether we adopt that budget or not. You are denying the people of South Africa to see what’s happening in this government.  There is no government. It has collapsed. It has no capacity to present a budget,” Malema said.

He added that the Speaker had “subjected the budget of South Africa to party politics”.
“Unprecedented. This is not a practice that we want to set for this Parliament. It is going to be your legacy, Speaker, that during your tenure, Parliament could not debate and adopt [a] budget. You are now subjecting the budget of South Africa to party politics when the budget is supposed to be above party politics. 

The EFF leader added that South Africa’s fourth biggest party wants the country to raise more money by increasing corporate tax and introducing wealth tax.

MKP Chief Whip Mzwanele Manyi said the budget cancellation was an indication that the Ramaphosa government had failed. 

“To have a day like this is a serious indication of the crisis that this country is facing. This country has got no leadership,” Manyi maintained. 

Vuyo Zungula, ATM leader, shared Malema’s sentiments. He also accused Didiza of trying to make the government’s “incompetence” Parliament’s by postponing the budget speech. 

“You can not allow a case of the incompetence of the executive to be the incompetence of Parliament. The executive did not know yesterday that there is going to be a budget today, and that there is no agreement in the so-called GNU. Therefore, the Minister of Finance must come here, present what he has, and let us the representatives of the people decide for the people. Now as the Speaker you want to assure the markets and all of this. It is problematic. This house does not belong to the markets. It belongs to the people,” Zungula said. 

ActionSA parliamentary leader Athol Trollip said the postponement is a failure for the 10-party GNU. 

After the cancellation, Godongwana said the postponement was needed to give the GNU Cabinet time for further deliberations and for members time to find one another. He added that a “new or amended” budget will be tabled next month. 

“Cabinet conceded that although the tabling of the 2024/2025 budget was scheduled for release at 2pm on the 19th February, a postponement is needed to allow for further deliberations to take place on the budget. [The] Cabinet is united in the view that the budget must strike a balance between the interests of the public, economic growth and fiscal sustainability. Furthermore, budgets are produced and presented before the National Assembly according to rules outlined in the Public Finance Management Act. Further discussions will take place in Cabinet in preparation for a new or amended budget to be tabled on the 12th of March 2025,” Godongwana said. 

The budget speech has not been outright cancelled in South Africa’s history. Still, there have been instances where it was postponed or disrupted due to significant circumstances, leading to heightened uncertainty and cautious market reactions. One notable example occurred in 2020, when the budget speech was postponed due to the COVID-19 pandemic.

The speech’s original date was February 26, 2020, but it was delayed to that date due to the need to reassess the pandemic’s economic impact and adjust fiscal policies accordingly.

Another instance of disruption occurred in 2019, when the budget speech was interrupted by EFF MPs. They demanded that then-Finance Minister Tito Mboweni address the Public Investment Corporation (PIC) issue and its alleged mismanagement of funds. The EFF MPs staged a walkout, causing a temporary disruption, but the speech continued after order was restored.

The 2020 budget postponement created uncertainty among investors and businesses, as the budget speech is a critical event outlining the government’s fiscal plans, including taxation, spending, and economic policies. Delays raised concerns about the government’s ability to respond effectively to the economic challenges posed by the pandemic.

South Africa’s bond yields, particularly for government debt, were under pressure during this period. Investors were concerned about the country’s rising debt levels and the potential for a credit rating downgrade. The delay in the budget speech exacerbated these concerns, as markets were left without a clear fiscal roadmap.

The Johannesburg Stock Exchange (JSE) also reflected cautious sentiment. Companies, especially those reliant on government spending or policy direction, faced uncertainty about future economic conditions and potential tax changes. 

At the time, the country was already under scrutiny from credit rating agencies due to its high debt levels and weak economic growth. The postponement of the budget speech raised fears that the government might delay necessary fiscal reforms, increasing the risk of a further downgrade to “junk” status.