In an unprecedented move, South Africa’s annual budget speech has been postponed due to internal disagreements within the coalition government.
Finance Minister Enoch Godongwana was scheduled to deliver the budget speech today, but a cabinet meeting revealed significant divisions.
Budget speech postponed over VAT increase
The divisions are over a proposed 2% increase in Value-Added Tax (VAT), which would raise the rate to 17%.
The Democratic Alliance (DA) strongly opposed this hike, citing concerns over its potential impact on the economy and citizens already facing a high cost of living.
As a result, the budget presentation has been rescheduled for 12 March 2025.
This marks the first postponement of the budget speech since the end of apartheid in 1994, highlighting the current political complexities and economic challenges facing South Africa.
This budget speech postponement also had immediate economic repercussions.
Effect of budget speech postponement
The South African rand weakened, trading at 18.565 against the U.S. dollar, a 0.9% decline from its previous close.
Additionally, the country’s main stock index experienced a downturn, with significant losses in the retail sector, which would be directly affected by a VAT increase.
The delay underscores the challenges within South Africa’s coalition government, formed after the African National Congress (ANC) lost its parliamentary majority in the last election.
The necessity for consensus among diverse political partners has complicated decision-making processes, especially on critical fiscal policies.
Finance Minister Godongwana emphasised the need for further deliberations to balance public interests, economic growth, and fiscal sustainability.
