The annual tabling of the national budget in parliament is not an event. It is a major process. This involves not only preparation of the budget (adding up the amounts) and the budget speech, but also publication of a whole array of documents.
These include the Budget Review, the highlights, the presentation in PowerPoint format, the estimates of national expenditure and the tax pocket guide. As the 2025 budget was not tabled and will be reviewed, it is not clear which of these documents must be revised and republished. It will be interesting to see whether the auditor-general will classify this as fruitless and wasteful expenditure.
The planning of budget day is a major logistic event. Many officials and politicians travel to Cape Town, where there are media conferences and social events to disseminate the budget. This now also looks like fruitless and wasteful expenditure.
One little-known activity is the budget lock-up. Economists, journalists and other interested parties can apply to attend the lock-up on the morning of budget day. These events in Cape Town and Pretoria are arranged by the National Treasury. On the day of the now-dead budget, I was in the lock-up in Pretoria.
Participants get all the documentation on a confidential basis and must stay in the lock-up until the minister of finance starts reading the budget speech. This is an honoured tradition, with participants respecting this embargo.
However, on February 19 2025 the minister was silent, implying that lock-up participants could not leave. When it emerged that the reading of the budget speech had been postponed to March 12, for a short moment I was concerned about remaining locked up until further notice.
By about 3pm participants were allowed to leave. I jumped at the opportunity with great relief, as March 12 seemed far away.
After leaving the lock-up, I felt ethically bound by the confidence entrusted to me when I received the budget documentation well before their official release. I cancelled all media engagements and declined any further invitations to comment.
It was difficult to judge after the event whether I was right or wrong in immediately refraining from comment, because the Treasury announced later on February 19 that the embargo had been lifted. This was the right decision, as a large group of people cannot keep secrets.
With the embargo lifted, I feel comfortable sharing thoughts on what I saw. It is common knowledge that the big issue that killed the budget was raising VAT by two percentage points. The extra revenue budgeted from this source would have been R60bn.
It will be interesting to see whether the auditor-general will classify this as fruitless and wasteful expenditure
With a VAT increase in abeyance, the South African population faces the R60bn question. How will this gap be filled, if not by an increase in VAT?
The government raises an array of taxes and can even introduce new taxes, but there are really only three areas (excluding VAT) where big money can be raised at short notice.
The first is an increase in company tax. At a rate of 27%, the (dead) budget provided for R325bn from this source. On an assumption that there is neither a negative impact from a higher tax rate nor a negative feed-through effect to businesses, an increase of five percentage points to 32% in company tax would raise R60bn.
Second, the dead budget reports revenue of R800bn from personal income tax. On the implausible assumption that higher taxes have no negative impact on revenue, an income tax surcharge of 7.5% on South Africa’s 7.9-million personal income taxpayers would raise R60bn.
Lastly, the government could borrow an additional R60bn. This would increase the deficit before borrowing from R353bn to R413bn, equal to 5.2% of GDP, rather than 4.4% as in the dead budget. An additional borrowing requirement of R60bn would also increase total government debt from R5.9-trillion (76.1% of GDP) to R6-trillion, or 76.9% of GDP.
Higher debt brings with it an increase in interest rates, so the primary surplus as an explicit fiscal anchor might also be in jeopardy with larger borrowing. The fiscal anchor is to be welcomed, as the Treasury commits to annual government revenue exceeding annual expenditure, excluding interest on government debt.
This leaves the government of national unity (or disunity, judging from the inept handling of the budget dispute), political parties, the Treasury and all South Africans with a R60bn question. The public must wait until March 12 to hear the answer. Should I take the risk of going to the budget lock-up then, or will the budget be postponed again?
* Rossouw is an honorary professor at Wits Business School and a former head of the school, and a former deputy general manager and currency specialist at the Reserve Bank
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