Analysing the government’s budget is an annual ritual in South Africa. This plays out in the media and on stages such as debating forums, seminars and symposiums, with taxpayers complaining about the pain imposed on them by the budget.
This analysis is to be expected and is positive for public debate in a country with free speech and media freedom. Ultimately, the budget is where the government reaches into our pockets.
In return for this tax claim on our hard-earned income and savings, taxpayers expect sanity and respect from the executive. Unfortunately, these aspects are often lacking, with corruption, state capture and bling expenditure like motorcades.
The same is true of the bloated executive. I wonder if anybody knows all the names and portfolios of our cabinet ministers, deputy ministers, premiers and MECs. The country is overgoverned at great expense by a swollen executive, yet there is also a clear lack of governance.
The dead budget of February 19 2025, with its proposed increase in VAT, was not read in parliament but has become one of the most overanalysed budgets in South African history. Particular focus was on the reasons provided for the VAT increase.
In return for this tax claim on our hard-earned income and savings, taxpayers expect sanity and respect from the executive
Most disconcerting was the unbudgeted increase granted to civil servants, in addition to their annual notch increases. The government’s negotiators seemingly ignored the wage agreement’s burden on finance minister Enoch Godongwana.
South Africa had a similar fiscal fiasco nearly 40 years ago. It left then minister of finance Barend du Plessis in a serious predicament.
Early in 1988, then state president PW Botha announced several measures to restore fiscal and economic discipline in South Africa. One was to withhold any general civil service remuneration adjustments, other than the notch increases for which civil servants qualify. The minister of finance budgeted according to this commitment by the head of state. This reflected fiscal realism in the budget, considering the country’s difficult economic and financial conditions amid sanctions and a foreign debt standstill.
The fiscal fiasco of September 1988 was therefore clearly unexpected and a serious blow to domestic financial markets.
While Du Plessis was at the annual International Monetary Fund meetings in Berlin, Botha was convinced by the minister of education, FW de Klerk, to announce a general remuneration adjustment for teachers. This came as a surprise to Du Plessis — one of the attendees at the meeting told him he had read about it in the newspapers. The general increase for teachers soon escalated into much broader general adjustments. Naturally, there were serious budgetary implications.
To add insult to injury, Botha also announced that Du Plessis would explain the funding of this adjustment upon his return from Berlin. Government budgets and tax changes are announced only once a year. Du Plessis could therefore not announce an increase in taxes. A tax increase to fund this unbudgeted expenditure would have been the appropriate remedy to protect whatever semblance of confidence was left in the budget.
So, the government had no option but to increase borrowing to fund the unbudgeted increase. In similar cases of unbudgeted expenditure, the government withdrew funds from the strategic oil reserve.
In 2025, South Africa faces another fiscal fiasco. Is the positive balance of R350bn in the Gold & Foreign Exchange Contingency Reserve Account at the Reserve Bank now tempting a desperate government?
* Rossouw is an honorary professor at Wits Business School and a former head of the school, as well as a former deputy general manager and currency specialist at the Reserve Bank
