‘Sick and tired’ Godongwana must go

After 27 years as a journalist, I am rarely surprised. But during my interview with Finance Minister Enoch Godongwana on RSG Geldsake, just hours after he delivered his 2025 Budget Speech, I was astounded.

During the interview, I asked why he did not announce targeted spending cuts, as the budget suggests a total expenditure increase of 7.8%, nearly double 2024’s inflation rate. “There are no spending cuts in this budget at all,” Godongwana said.

“We have cut budgets for a number of years, and they’ve not achieved the desired outcome. We’ve not achieved fiscal consolidation. Instead, the budget cuts have led to an increase in debt-to-GDP ratios.

“So we have taken a different strategy this time, and that strategy is to go over to the revenue side of the equation and increase revenue to achieve two objectives – to fund the developmental objective and at the same time achieve debt reduction,” he added.

Later in the interview, I asked him who made the decision to change course. He said: “I take responsibility for that decision.”

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He doubled down the following day at the News24 Business Budget Briefing, stating unequivocally that he decided to increase Vat alone.

“I plead guilty,” he said. “I woke up one day and said, everybody has been attacking me for austerity. I am sick and tired of it. This time, I am going to raise tax.”

Unfortunately, given South Africa’s fiscal position and poor economic growth rate, he doesn’t have the discretion to banish austerity.

This is a significant departure from previous government policy, or at the very least, from its historical approach.

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If austerity didn’t achieve the outcomes the National Treasury hoped for, the problem lies in the historic implementation of the proposed cuts.

Godongwana is responsible for government spending, so his “sick and tired” moment is instead an acknowledgement of his failure to effectively introduce measures to cut costs.

It smacks of ignorance, arrogance, incompetence, and a total lack of understanding of South Africa’s fiscal mess.

What makes this even more remarkable is that his prepared budget speech did not mention this shift – he did not even use the word “austerity” once.

In a government of national unity, such monumental decisions should not be taken lightly, let alone by a single minister acting on his own volition within a coalition government.

The ANC does not govern alone, and fiscal policy should result from careful deliberation and broad consultation.

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Pro-growth strategy needed

The state’s dire fiscal position is not the result of a lack of taxation but rather poor economic growth. The economy has stagnated for over a decade, failing to generate the revenue needed to sustain rising government expenditures.

There are always plans to increase growth, but after 15 years of failing to inject any meaningful growth, it is evident that a new approach is necessary.

This budget was an opportunity to announce a bold, pro-growth strategy that incentivises investment, boosts job creation and expands the tax base.

Instead, Godongwana delivered a budget that does the opposite: it stifles growth by increasing the tax burden on individuals and businesses while failing to rein in government spending.

And there have been a few success stories Godongwana could have learnt from.

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The type of ideas we need to see

A prime example of a pro-growth policy was the government’s response to the electricity crisis, which encouraged businesses and households to invest in renewable energy.

The tax incentive allowed companies to claim 125% of the cost of solar installations, accelerating private investment in electricity generation.

The incentive was a success, driving much-needed capital into energy projects and helping businesses mitigate the effects of load shedding.

This budget could have been a stroke of genius if Godongwana had proposed similar tax incentives to encourage businesses to invest in other infrastructure, expand their operations, and procure more products from local suppliers.

Imagine a targeted tax incentive that allows businesses to claim 125% of their spending on upgrading manufacturing facilities to increase production, opening additional stores or facilities, and expanding logistical capacities.

The government could also have replaced the current punitive preferential procurement policy with an incentive-based one – rewarding businesses for local procurement rather than enforcing it through bureaucratic regulations.

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Likewise, tangible incentives for job creation, such as a temporary payroll tax reduction or a tax credit for every new job created, could have meaningfully tackled the country’s unemployment crisis.

Even targeted support for sectors critical to economic growth, such as small-scale agriculture, industrial manufacturing, and digital technology startups, would have been a game-changer.

These measures would not only have cushioned businesses from rising costs but also ignited economic activity, which would have increased tax revenues and helped South Africa break free from the cycle of low growth and declining investor confidence.

Instead, we are left with a budget prioritising short-term tax collection over long-term economic expansion – a missed opportunity of historic proportions.

Godongwana’s arrogance in making such a consequential decision without consultation reflects a minister who has run out of ideas.

If he cannot present a better budget that prioritises economic growth rather than just tax hikes, he should probably resign.

If not, he should be fired.

This article was republished from Moneyweb. Read the original here.