Budget speech: ANC ministers also opposed VAT hike, Godongwana slams DA’s ‘identity crisis’

ANC’s Cabinet ministers were among those who opposed the proposed 2% increase in value-added tax (VAT) outlined in the budget speech, according to Finance Minister Enoch Godongwana.

Godongwana was set to deliver the budget speech on Wednesday at the Nieuwmeester Dome in Cape Town, but it has been postponed to 12 March.

This marks the first time since democracy that a budget speech has been cancelled.

The delay comes amid disputes within the government of national unity (GNU) over proposed tax increases.

Godongwana explains budget speech disputes

Speaking during a media briefing, Godongwana said that the postponement will allow further deliberations to take place.

“Cabinet is united in the view that the budget must strike a balance between the interests of the public, economic growth and fiscal sustainability,” he said.

The minister stressed that the budget should be approved before the financial year ends on 31 March.

However, in exceptional cases, it can be presented soon after the next fiscal year commences on 1 April.

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He highlighted that holding a Cabinet meeting before the budget presentation was standard practice, as some issues were not discussed earlier due to their “market-sensitive” nature.

“Two weeks ago, we went to Cabinet and gave an indication precisely because of the market sensitivity of some of the issues.

“We didn’t put some of these issues on the table and we normally do it early in the morning [on the day of the budget]. Unfortunately, we didn’t start early because the president was not around so we started late,” Godongwana said.

Watch the briefing below:

He also clarified that the VAT hike was not the only point of contention.

Godongwana explained that the debate focused on whether the government should borrow more, cut expenditure, or raise taxes, and the implications of each option.

“There’s general agreement that in the current environment, we need to find a way of funding our priorities. The debate is what is the best way of doing it.”

‘No DA vs ANC’

Minister in the Presidency Khumbudzo Ntshavheni dismissed claims that party politics resulted in the postponement.

Instead, she said the focus was on managing the economy and protecting public interests.

“It’s never a DA-ANC issue. It’s a collective Cabinet decision,” Ntshavheni said, adding that Treasury needed to balance the books.

READ MORE: Budget speech postponement embarrassing but might be sign that GNU works

She rejected the assumption that disagreements over the proposed tax increase came from a single party, calling it “completely wrong”.

“The differences were across parties, including ANC ministers,” she explained.

“So let’s not go there, it is Cabinet ministers that did not approve the budget and said they needed more time to engage with the issues,” the minister added.

Ntshavheni assured that Cabinet would reach an agreement by 12 March.

“We are all ministers of the government, we share a common concern about the impact of the budget in terms of achieving our priorities and protecting the poor.”

‘Budget speech a statement of Cabinet’ – Godongwana

Meanwhile, Godongwana emphasised that Cabinet has been forced to discuss trade-offs.

“A budget is a statement of Cabinet. So what is happening in my view when Cabinet becomes involved in the detailed discussions, it is useful for us in that sense.”

He confirmed that a comprehensive spending review will take place, but not before 12 March.

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When asked about the possibility of zero-based budgeting, Godongwana said he was unaware of any country using this method.

“People tell me about zero-based budgeting… I want to know a country which does it so that I can go and experience it. I’ve seen it in textbooks, but I have not seen a country that does it.”

Government won’t consult everyone when drafting budget speech

Godongwana dismissed the idea that government would engage all sectors of society when drafting the budget.

“It doesn’t mean we don’t listen to any proposals that are submitted, but it doesn’t mean we are going to organise rallies across the country for civil society and everybody.”

Addressing protests by labour unions and civil society groups ahead of the budget, Godongwana said such demonstrations were not unusual.

“This is my fourth [budget] and I don’t remember a single time when [Zwelinzima] Vavi wasn’t outside.”

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Responding to South African Revenue Service (Sars) commissioner Edward Kieswetter’s remarks questioning whether VAT increases boost revenue, Godongwana said the commissioner had been misquoted.

“I called him and the commissioner [told me] ‘I said it some three weeks ago, but not in the same context’.”

He emphasised that while Kieswetter handles tax administration, his responsibility lies in tax policy.

“It’s quite important that both of us keep to those two lanes.”

Media leaks

Godongwana revealed that the VAT increase was discussed in a previous Cabinet meeting, suggesting that a minister leaked the information.

“For somebody saying they were unaware is disingenuous because… I tabled it in Cabinet. What was interesting is that some of the people who leaked were Cabinet colleagues.”

He rejected claims that the Freedom Front Plus (FF Plus) first learned of the increase on Wednesday morning.

“The Freedom Front Plus is not telling the truth,” he said.

He added that the DA had an “identity crisis”.

“They want to be always given attention. Even things they did not do, they claim it’s theirs.”

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