Tight-lipped Treasury braces for tough Budget to plug R75bn shortfall

Finance Minister Enoch Godongwana and National Treasury are tight-lipped on the spending cuts or savings in the revised Budget to be tabled on 21 May. The new Budget is intended to plug a R75-billion shortfall caused by the decision to withdraw a proposed VAT increase.

During a media briefing on 30 April, Godongwana said he had been told to refrain from any further media engagement ahead of the Budget announcement.

“The DG has instructed me to tell you that between now and the 21^st, I won’t talk to you,” he said, referring to National Treasury Director-General Dr Duncan Pieterse.

With just weeks to go, the revised Budget will include a new fiscal framework, Appropriation Bill, Division of Revenue Bill, and the already tabled Rates and Monetary Amounts and Amendment of Revenue Laws Bill.

A statement from the Ministry of Finance confirmed that all adjustments would follow the technical and legal processes outlined in the Money Bills and Related Matters Act. These include formal consultations with the Financial and Fiscal Commission, engagement with political parties in the Government of National Unity (GNU), and Cabinet approval ahead of tabling in Parliament.

Before his three-week “radio silence” kicked in, Godongwana said Treasury would focus on three key areas: controlling spending, boosting revenue collection, and laying the groundwork for stronger economic growth.

He warned that, besides VAT, increasing personal income tax and corporate tax was not an option, because it would stifle growth, savings and job creation.

In the same breath, he said borrowing more would worsen South Africa’s debt crisis.

“We already spend more than a billion rand a day servicing debt. We must do more with less, review government spending critically, root out waste. Every cent of public money must be spent wisely.”

Godongwana added that job creation remains the government’s top priority.

“We must remove barriers to investment, unlock private sector capital, and expand opportunity for all South Africans through initiatives like Operation Vulindlela,” he said.

The initiative, jointly run by the Presidency and National Treasury, aims to modernise and transform network industries such as electricity, water, transport, and digital communications.

“The challenges ahead are serious but not insurmountable. If we work together, stay focused and persevere, we can chart a better course for our economy and our people,” he said.

Social spending remains a priority, but new budget pressures loom

Although Godongwana was guarded in his comments about the forthcoming re-tabling of the Budget Review, he confirmed that social services – education, health, and social protection – remain at the core of government’s spending priorities.

He also acknowledged that new spending demands have emerged since the Medium-Term Budget Policy Statement (MTBPS) was tabled in October last year.

Reflecting on the Budget process, Godongwana said departments were given their baseline allocations in December, which serve as the foundation of the Budget. A technical committee then assesses additional funding requests from departments. He emphasised that this process is purely technical, with “no political agendas”.

Godongwana said departments have submitted funding proposals that would amount to an additional R112bn over the medium-term framework. These proposals include critical needs in sectors such as education and health, particularly the issue of unemployed doctors.

“In health alone, about 9 000 workers were lost in the last financial year,” he noted, adding that no funds are currently available to replace them. “Health departments have also built up substantial accruals – they haven’t been paying for goods and services over the past few years. These are health centres that support the country’s poor, and that situation needs to be addressed.”

He said the core departmental budgets will not be cut. However, recent funding increases that were intended to meet emerging priorities may be revised.

“In the statement we issued on 24 April, we made one general comment: there will be a need for adjustment,” he said. He explained that the adjustments will apply to the additional increases over baseline allocations — not the baselines themselves.

Godongwana said it is becoming clear that the funding originally earmarked for those increases may no longer be available. “We’re looking at the numbers. I can’t say what the final picture will look like, but there will be a need for adjustment.”

As to whether the government is considering selling assets to address the revenue shortfall, the minister said that, for now, this is not part of the plan.

“Could there be asset sales? There’s a possibility, but we’re not factoring that here. There’s ongoing work in different areas where there’s ports and so on. But it’s not something which is taken into account in this thing,” he said.

SA spends R1bn a day on debt interest

Asked about the government’s commitment to fiscal consolidation – the effort to reduce the budget deficit and stabilise public debt – Godongwana said it “is still very much in place”.

However, South Africa’s debt profile remains a major concern. Gross loan debt is expected to exceed R5.2 trillion in 2025, equivalent to about 75% of GDP, and could rise above 77% in the years ahead without significant policy changes. This is well above the commonly accepted 60% debt-to-GDP ratio used as a benchmark for emerging markets.

Debt-service costs are also placing growing pressure on the fiscus, now absorbing about 21% of government revenue. In practical terms, this means that for every R5 collected by the state, more than R1 is used to pay interest.

“We’ve got to have a conversation as a nation. Should we be paying the amount of money that we’re paying on debt service costs?” Godongwana asked.

“I made an indication earlier that now we’ve reached a stage where we’re paying R1bn per day on debt service cost. We’re also borrowing R2bn a day. Fifty percent of what we’re borrowing per day, it goes into debt service cost,” he said.

He warned that unless the country acts decisively to rein in debt, investment in essential services such as education, health, and infrastructure will continue to be squeezed out.

“We should make sure that in our lifetime we can reduce the debt, so that we can reduce its impact on crowding out services that are critical. Fiscal consolidation is an instrument to achieve that objective.”

Parliament gears up for Budget tabling

Although the 2025 Budget Review is set to be re-tabled on 21 May, Parliament must still approve it – a process that, as recent history shows, may not be swift.

Clarifying the timeline, Pieterse said section 10 of the Money Bills and Related Matters Act requires the Appropriation Bill to be passed within the first four months of the new financial year.

“So, the first of April plus four months, that’s the actual deadline that needs to be met, and we will obviously be working with Parliament to ensure that we can meet that deadline.”

In a recent interview with SABC News, the Speaker of the National Assembly, Thoko Didiza, confirmed that preparations are under way for the tabling of the Budget on 21 May. Speaking on the procedural aspects, Didiza outlined the steps that will follow once the minister presents the Budget in Parliament.

Upon tabling, the Budget undergoes scrutiny by the Joint Standing Committee of Parliament and the Appropriation Committee. These bodies will focus on key Budget instruments, namely the fiscal framework, Division of Revenue Bill, and Appropriations Bill. Each of these components must adhere to a prescribed process.

“The fiscal framework is the first to undergo review,” explained Didiza. “Upon receiving it, the committee will engage in consultations, invite public presentations, and after a 16-day period of consideration, table their findings before Parliament.”

This initial phase sets the stage for further deliberations.

Subsequently, attention shifts to the Division of Revenue Bill, which falls under the purview of the Appropriations Committee. According to the Money Bills Act, this committee is mandated to conclude its assessment within 35 days. Once finalised, the bill proceeds to the floor of the House for broader legislative consideration.

Didiza expressed confidence in Parliament’s ability to meet the deadline by the end of July.

Until the new Budget is passed, government services will continue to be funded under section 29 of the Public Finance Management Act. This allows spending of up to 45% of last year’s Budget during the first four months, and up to 10% for each month after that.

While the country waits for the 2025 Division of Revenue Act to be passed, funding for provinces and municipalities will continue under the 2024 Act, allowing transfers of up to 45% of their allocated funds.