By Lehlohonolo Lehana.
Finance Minister Enoch Godongwana came under fire from Members of Parliament (MPs) on Friday, 14 March, when he presented his revised Budget 2025 to Parliament’s finance portfolio committees.
Godongwana briefed Parliament’s Standing Committee on Appropriations, Select Committee on Finance and Standing Committee on Finance.
Speaking to MPs before the presentation, Godongwana said that “irrespective” of where political parties stand on a number of issues – in an indirect reference to the impasse on the VAT hike – “we [must] keep our eyes on the ball”.
He said the Budget must address the needs in communities, specifically the needs in the health, defence and ducation sectors. Godongwana spoke about the hundreds of doctors left jobless in SA because of a shortage of funds.
“We may disagree, colleagues, about methodologies and other things, but I don’t think we’ll disagree on the substantive nature of what we’re attempting to resolve.”
Godongwana has claimed responsibility for coming up with the idea of the contentious 2 percentage point increase in VAT, which had caused the postponement of the initial Budget on 19 February.
DA MP Mark Burke accused Godongwana of “undermining” the Treasury after going against the advice of its director-general Duncan Pieterse, who warned him against the increase.
“If that’s the case, it seems that you [were] acting contrary to the advice of the Treasury, and would you then agree with me, Minister … that in fact you have now gone rogue and you are undermining the Treasury,” he said.
DA MP Kingsley Wakelin said “a number of very strong and very valid submissions were made by the DA” to Godongwana, but none of them received his support.
“Is it just being defiant?” Wakelin asked Godongwana.
However, Pieterse, in a presentation to MPs prior to Wakelin’s comments, stressed that National Treasury had “considered different” options to raise the revenue required in order to cover the government’s expenditure.
He explained why Treasury decided to increase the VAT rate by half a percentage point, which will be followed by another half a percentage point increase next year.
“It is our view that an increase in the spending has to be accompanied by an increase in revenue in order for the government to maintain its commitment to fiscal sustainability, including a rising primary surplus and stabilising debt in 2025/26, “said Pieterse.
“While this Budget includes a mixture of tax measures, it does still consider that a VAT increase will be indispensable for raising the additional revenue.
“We were concerned that increasing personal income tax or corporate income tax would be more negative for employment, savings, investment and growth than a value-added tax increase,” he said.
Pieterse added South Africa already has a “very high contribution” of corporate income tax towards tax revenue.
EFF MP Constance Mkhonto said there is no “clear and achievable plan for job creation “in the Budget.
“We can’t increase VAT to the unemployed masses of this country … When is the issue of unemployed youth going to be addressed?”
ActionSA MP, Alan Beasley, told Godongwana that the budget should rather target the bloated Cabinet, which comes at a huge cost to the fiscus.
“You can’t ask ordinary South Africans to tighten their belt when the Cabinet is living a life of opulence and luxury.”
MPs will continue debating the budget in the various committees over the next three months before they vote on whether to adopt it as is or with changes.