Finance Minister Enoch Godongwana stated South Africa’s budget may be revised further amidst political discussions on a controversial VAT increase. Major parties largely oppose the revised proposal, making coalition support crucial for approval. Godongwana emphasized the need for clear trade-offs in budget modifications and expressed confidence in favorable ratings agency responses to the budget if passed.
South Africa’s Finance Minister Enoch Godongwana announced that the country’s budget may undergo further adjustments as discussions with political parties continue to address disagreements regarding a controversial value-added tax (VAT) increase. Despite a revised budget proposing a decreased VAT hike of 1 percentage point over two years, major parliamentary parties have largely rejected it.
The African National Congress (ANC) must secure support from at least one significant party for the budget to pass; however, the Democratic Alliance, the ANC’s primary coalition partner, is steadfastly opposed to any tax increases, aligning with other major parties outside the coalition. The budget has emerged as a considerable challenge for the coalition established after the ANC lost its parliamentary majority for the first time since apartheid’s end.
Minister Godongwana expressed openness to proposals from lawmakers that might amend the budget but emphasized the necessity of recognizing the associated trade-offs. He elaborated that if the VAT, representing 14 billion rand in additional revenue, is removed, the parliament should specify which expenditures will be cut. He also dismissed assertions that eliminating cabinet positions would generate the necessary funding for essential services such as health and education.
Godongwana assessed that the current parliamentary budget could be among the most contentious in years, noting that there is little likelihood of future tax raises. He maintained that the budget aims for public debt to peak in the forthcoming fiscal year, with a gradual reduction in the deficit over the next three years. He believes the budget could be positively perceived by ratings agencies, barring any hurdles in parliamentary approval. “That’s a test we’ve got to pass,” he remarked.
In summary, Minister Enoch Godongwana has indicated that further negotiations may lead to modifications in South Africa’s budget, especially concerning the contentious VAT increase. While seeking support from other major parties, the ANC faces significant opposition. Godongwana underscores the implications of any budget amendments and contemplates the perception of the current budget by ratings agencies, emphasizing the necessity for its passage through parliament.
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