Treasury scrambles to salvage Budget ahead of new deadline

After the U-turn on VAT, a legal blow and chaos in the coalition government, Finance Minister Enoch Godongwana insists the third Budget version will be 'credible'. The markets are watching. By Yeshiel Panchia

- By Yeshiel Panchia

At a hastily convened media briefing on Wednesday, 30 April, Finance Minister Enoch Godongwana confirmed that the National Budget would be tabled for a third time in Parliament on 21 May.

The announcement follows two failed tablings: one blocked by legal action, the other torpedoed by coalition deadlock over the now withdrawn VAT increase.

"This decision was shaped not only by political debate, but importantly by the voices of South Africans," said the minister, without any apparent irony.

Accompanied by National Treasury director-general Duncan Pieterse, Godongwana described the decision to reverse the VAT increase as both pragmatic and democratic.

The task now, he admitted, was to rebuild credibility in the eyes of the public, Parliament and capital markets - without resorting to new borrowing or tax increases. The new Budget, he said, must be "saleable" to MPs and "credible" to investors.

Although the VAT climbdown may have granted Treasury and Godongwana temporary political cover, it has left behind a gaping R75-billion shortfall in the medium-term fiscal framework.

With the constitutionally mandated Budget deadline of 31 July now looming, the Treasury faces one of its most complex fiscal re-engineering exercises in recent memory.

From U-turn to restart

The legal architecture underpinning the Budget has now been reset; the high court order not only suspended the VAT hike, but also invalidated the parliamentary resolutions that had adopted the fiscal framework meaning that a full reboot of the Budget needs to take place.

The 21 May retabling will encompass a full legislative reset: the Fiscal Framework, Appropriation Bill, Division of Revenue Bill and the previously tabled Rates and Monetary Amounts Bill will all be presented to Parliament for fresh approval.