The failure of the February 2025 budget to even make it to the house first time around sent the Treasury staff and cabinet frantically back to the fiscal drawing board, provided fodder for Orwellian populism, and abruptly stopped celebrations from health and education MECs and activists alike. However, it also provided the country with an important and timely opportunity to recalibrate fiscal institutions and rebuild credibility.
The fundamental purpose of a country’s budget is to credibly outline available resources for the upcoming year (the annual budget) or over the next three years (the medium-term budget policy statement - MTBPS), and how the government will allocate these. A credible budget — one that presents the intended and most likely outcomes for expenditure — is essential for planning, programme integrity and service delivery.
In recent years, the credibility of SA’s budgets has been eroded. Spending execution (what is actually spent) has differed substantially from what was tabled in the budget — what the government said it would spend. While minor revisions are normal, the quantum of recent adjustments suggests a deeper problem.
The inability of the cabinet to make difficult decisions regarding which programmes to fund and — more important in the context of fiscal consolidation — which it will not fund, has forced the Treasury to use the budget as a negotiating tool. In pursuit of debt stabilisation, it has repressed expenditure growth and taken a wait-and-see approach to demands it will be forced to fund when the politics demands it. This has resulted in large adjustments to the budget, rendering it less reliable.
The unprecedented increase in expenditure between the 2024 MTBPS and the failed 2025 budget was a rupture in the long-brewing credibility crisis of SA’s fiscal institutions. The October 2024 MTBPS, tabled under the new coalition government, indicated a continuation of the austere path for expenditure, and suggested a government unresponsive to critical expenditure pressures, even if they presented an existential threat to society.
Four months later, the 2025 budget showed that the Treasury was forced to accommodate a staggering R109bn in additional expenditure for 2025 compared with the 2024 MTBPS. Accommodating this additional expenditure pressure rendered the 2024 MTBPS meaningless, and revealed a government unable to reach consensus.
Now, under a coalition government representing 71% of a diverse polity and baptised in the messy world of governance, the country has an opportunity to make those tough choices and articulate a clear credible vision for policies backed by a budget. The ANC, facing a steadily declining majority, has been reluctant to take tough choices on key policy areas that would alienate parts of its constituency, preferring to make populist overtures and “kick-for-touch” on tough choices, lest it lose its majority - which it eventually did.
Yet a coalition government representing the vast majority of voters could provide the political cover and diffuse the usual political backlash from making tough policy decisions that would ordinarily threaten its ruling majority. One such example is the future of the 网易体育 social relief of distress (SRD) grant. The government has extended this grant on a year-to-year basis since its inception as a temporary intervention, avoiding a definitive policy decision. However, its continuation necessitates a structural tax increase — an issue the recent budgetary bungle illustrates is politically fraught. But terminating the grant is equally challenging. A coalition government, taking collective ownership of tough policy choices in the interests of the majority’s long-term prosperity, where political costs are diffused across multiple parties, could provide the political cover needed to take a decisive stance.
The current crisis also presents an opportunity to improve democratic deliberation over revenue policy. The country’s budgetary institutions, including the political ministers’ committee on the budget and the technical medium-term expenditure committee, have historically facilitated consensus on the budget. However, these structures focus on expenditure, with revenue policy under the purview of the Treasury. While tax proposals are formally tabled, they are crafted by the Treasury’s tax policy unit, not extensively debated at cabinet level, and only considered by parliament after the fiscal framework is adopted. There are sound reasons for this, given the sensitivity of tax changes. However, the 2025 budget bungle presents an opportunity to recalibrate the country’s budget-making infrastructure.
Similarly, long-overdue tax reforms, particularly in health taxation, could gain traction. SA’s budget bears significant costs from alcohol and tobacco use, including enormous public expenditure in health and criminal justice, lower life expectancy and social burdens. Yet the excise duties fail to fully account for their economic and societal costs. A coalition government, with the ANC’s interventionist instincts and the DA’s libertarian leanings, could find middle ground on tax adjustments that serve the national interest.
A well-managed coalition government can strengthen SA’s fiscal institutions and enable the tough policy choices needed for fiscal sustainability. With coalition partners sobering up from their first-hand experience in the messiness of governance, we are entitled to hope this translates into a cabinet that prioritises evidence-based policies that deliver the country’s needs, easing the way for difficult but necessary choices.
• Amra is a visiting researcher at the Public Economy Project at Wits University’s Southern Centre for Inequality Studies. He has worked in public finance and fiscal policy for more than 15 years, including roles at SA’s National Treasury and the parliamentary budget office.
This article was first published in the Business Day
