South Africa’s 2025 budget is hanging in the balance as political infighting within the Government of National Unity (GNU) threatens to derail its approval. Finance Minister Enoch Godongwana tabled the budget on Wednesday, but it remains a proposal—not a done deal. With the Democratic Alliance (DA) opposing key elements, including proposed tax hikes, the country is in uncharted territory.
A Budget Without Consensus
The GNU, formed after the African National Congress (ANC) lost its parliamentary majority in the 2024 elections, is struggling to find common ground on fiscal policy. The ANC and DA, the two largest parties in the coalition, are at odds over the budget’s proposed increase in the Value-Added Tax (VAT) rate from 15% to 16% by mid-2026.
The DA has firmly opposed any tax hikes, insisting instead on measures to stimulate economic growth. DA leader John Steenhuisen criticized the ANC for failing to accept the reality of shared power, stating, “We have been very clear from the beginning that we had an election promise not to raise taxes.”
Unprecedented Challenges
The deadlock has thrown South Africa into unprecedented circumstances. If the DA votes against the budget, Godongwana may need to seek support from smaller parties, potentially making concessions to secure their backing. However, even this path is fraught with uncertainty, as other major parties like the uMkhonto weSizwe Party (MKP) and the Economic Freedom Fighters (EFF) have also rejected the tax increases.
Godongwana remains optimistic, stating, “We may have to mobilize other political parties and probably make concessions.” However, the lack of consensus has already rattled financial markets, with the rand losing 1.3% against the dollar and the Johannesburg Stock Exchange erasing gains on budget day.
Economic Implications
The budget’s failure to pass would have severe consequences for South Africa’s economy. Key allocations for infrastructure, social grants, and public sector wages are at risk. Business leaders have warned against complacency, emphasizing that the country does not yet have a budget.
Daniel Mminele, chairman of Nedbank Group, described the situation as “a whole new, unprecedented set of circumstances,” adding that it’s unclear how parliamentary committees will handle the process.
Lobby group Business Leadership South Africa (BLSA) called the lack of consensus “disturbing,” urging the government to face harsh realities. “Things cannot simply continue to be done in the same ways, because that will lead to the same outcomes,” the group said in a statement.
Key Budget Proposals at Risk
The tabled budget includes several critical measures:
- VAT Increase: A proposed hike to 16% by 2026 to generate additional revenue.
- Infrastructure Investment: Over R1 trillion allocated to transport, energy, and water projects.
- Social Grants: Above-inflation increases to support vulnerable households.
- Eskom Debt Relief: Final phase of debt relief to stabilize the utility’s finances.
These proposals now hang in the balance as political parties negotiate their positions.
What’s Next?
The budget will face its first major test in May when lawmakers vote on the revenue and expenditure plans. If the DA and other parties reject the budget, the GNU may need to make significant concessions or risk a fiscal crisis.
As the political drama unfolds, South Africans are left wondering whether their leaders can put aside differences to secure the country’s economic future.
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