South Africa’s two largest coalition parties have indicated progress in resolving the deadlock over the nation’s budget, with the rand experiencing a rally.
Source: CFO South Africa. SA Finance Minister, Enoch Godongwana.
South Africa’s 2025 National Budget has encountered significant challenges, leading to a postponed vote and ongoing negotiations among political parties. The primary point of contention is the proposed increase in the Value-Added Tax (VAT) by half a percentage point in 2025/26 and another half a percentage point in 2026/27, bringing the rate to 16% by the latter year.
This measure, expected to generate an additional R28bn in 2025/26 and R14.5bn in 2026/27 has been opposed by several key parties within the Government of National Unity (GNU).
The Democratic Alliance, the second-largest party in the Government of National Unity, expressed optimism that a deal will be reached by Wednesday, 2 April 2025 when lawmakers are set to vote on the fiscal framework — the first of several budget bills to be presented to Parliament in the coming months.
Democratic Alliance (DA) leader John Steenhuisen expressed optimism about reaching a budget compromise, stating, “We are closer than many people think and I remain hopeful that we will be able to find [consensus].” He highlighted the urgency of finalising the budget.
The African National Congress (ANC) is actively deliberating over the budget, and discussions were scheduled over the weekend.
If an agreement is not reached this week, Parliament may operate under interim appropriations, allowing expenditure up to 45% of the previous year’s budget.
This scenario could temporarily improve fiscal metrics by delaying certain expenditures. However, it would also introduce uncertainties and potentially hinder planned public services and infrastructure projects.
