The clock is ticking for the Treasury to determine whether re-tabling the national budget could serve as a potential solution to avert a recently scrapped VAT hike set to take effect next week.
Despite the Treasury’s abrupt U-turn on Thursday – announcing the 0.5% VAT increase, originally slated for May 1, had been scrapped – the hike remains legally binding. This is because parliament already approved the fiscal framework containing the tax adjustment on April 2.
To formalise the reversal, the Treasury must now navigate urgent legislative processes in the coming days, raising questions about the feasibility of undoing the decision before the deadline. The missing piece is where Treasury, which gazetted the law, sits on this issue, so they should guide Parliament.
“To unscramble this thing effectively means a third budget. An appropriations bill and division of revenue bill cannot be tabled inconsistent with the fiscal framework. Any law you consider that is not built on the fiscal framework will be wrong. We need to know the status of the fiscal framework,” said a source within President Cyril Ramaphosa’s government of national unity.
Another source warned that what people did not understand was that you cannot reach a deal in the absence of the Treasury.
“The Treasury has a certain level of independence.
It’s the finance minister that must make a proposal.
He must write to the speaker, saying, ‘I have listened to representations, and now I’m making a new proposal’.”
Regarding the R75-billion shortfall, Sunday World heard that the only option is expenditure cuts.
“That hole is not going to be filled. The country does not have a lot of money anymore.”
Finance minister Enoch Godongwana is expected to submit options to Parliament on which parts of the budget could be sacrificed. “We do not want higher taxes. We have also borrowed too much, so our credit limit is exhausted. That means we have to cut the budget now by R75-billion over three years. Parliament must eliminate the hole.”
Among the unbudgeted items is the social relief of distress grant, which was supposed to be temporary since Covid, which the ANC was too scared to withdraw over possible public backlash. The item accounted for about R102-billion over three years.
The public sector wage agreement, which costs about R35-billion over three years, was also not in the budget last October. Fee-free higher education was also not in the budget.
“We are going to end up taking away service delivery money,” a government insider warned, adding that the government wanted to build 16 000km of roads for a budget of R420-billion over three years, but “that is possibly going to be reduced, and all of those rural roads are not going to be fixed.”
