Exhausted and Frustrated: It’s Time for Godongwana to Depart

After 27 years as a journalist, I seldom find myself surprised. Yet, during my conversation with Finance Minister Enoch Godongwana on RSG Geldsake, just hours after he presented his 2025 Budget Speech, I was taken aback.

In the interview, I inquired why he did not propose targeted spending cuts, given that the budget indicates a total expenditure increase of 7.8%, nearly double the 2024 inflation rate. “There are absolutely no spending cuts in this budget,” Godongwana replied.

Read: #Budget2025 summarized – Godongwana announces a 0.5 percentage point VAT hike

“We have implemented budget cuts for several years, and they have not yielded the desired outcomes. We have not achieved fiscal consolidation. In fact, the budget cuts have led to an increase in debt-to-GDP ratios.

“This time, we are adopting a different strategy, focusing on the revenue side to increase funds for developmental objectives while also aiming for debt reduction,” he explained.

Later during the discussion, I asked him who was responsible for this shift in strategy. He stated: “I take full responsibility for that decision.”

The next day, at the News24 Business Budget Briefing, he reaffirmed that the decision to solely raise VAT was his.

“I plead guilty,” he stated. “One day, I woke up and decided I was tired of being criticized for austerity. This time, I will raise taxes.”

Unfortunately, due to South Africa’s fiscal circumstances and weak economic growth, he does not have the flexibility to eliminate austerity measures.

This marks a notable departure from prior government policy, or at least, from its historical practices.

Read:
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Budget will leave South Africans battered and bruised

If austerity did not yield the outcomes envisioned by the National Treasury, the issue lies in the historical execution of the proposed cuts.

As the steward of government spending, Godongwana’s “sick and tired” moment is, in fact, an acknowledgment of his failure to implement effective cost-cutting measures.

This reflects ignorance, arrogance, incompetence, and a complete lack of understanding of South Africa’s fiscal predicament.

What is particularly striking is that his prepared budget speech did not mention this strategic shift – he even avoided the term “austerity” entirely.

In a national unity government, such significant decisions should not be made lightly, especially by a single minister acting independently within a coalition context.

The ANC does not govern in isolation, and fiscal policy should come from thorough deliberation and broad consultation.

Pro-growth strategy needed

The state’s grim fiscal position is not a question of insufficient taxation but rather a result of poor economic growth. The economy has stagnated for over a decade, failing to generate the revenue necessary to support increasing government expenditures.

Plans to stimulate growth are always in the works, but after 15 years of failure to create meaningful growth, it is clear that a new approach is essential.

Listen/read:
The DA does not support the budget
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Treasury’s solution to the fiscal crisis: no cost-cutting, only tax increases

This budget presented an opportunity to unveil a bold, pro-growth strategy that incentivizes investment, enhances job creation, and broadens the tax base.

Instead, Godongwana presented a budget that does the opposite: it constrains growth by raising the tax burden on individuals and businesses while failing to curtail government spending.

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There are several success stories from which Godongwana could have drawn inspiration.

The kind of ideas we need to see

A prime example of a pro-growth policy was the government’s response to the energy 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, catalyzing private investment in electricity generation.

Read:
The VAT that broke the budget
Is this Ramaphosa’s most decisive economic decision since taking office? [June 2021]
Ramaphosa reshuffle: Mboweni exits, Godongwana becomes new finance minister [Aug 2021]

This incentive was successful, channeling critical capital into energy projects and assisting businesses in mitigating the effects of load shedding.

This budget could have been a stroke of genius if Godongwana had proposed similar tax incentives to drive businesses to invest in infrastructure, expand operations, and engage more with local suppliers.

Imagine targeted tax incentives allowing businesses to claim 125% of their expenses on upgrading manufacturing facilities to enhance production, open new stores or facilities, and improve logistical capabilities.

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

Additionally, tangible incentives for job creation, like a temporary payroll tax reduction or a tax credit for each new job created, could have significantly addressed the country’s unemployment crisis.

Even focused support for sectors integral to economic growth, such as small-scale agriculture, industrial manufacturing, and digital technology startups, would have been transformative.

These measures would not only have alleviated pressures on businesses but also ignited economic activity, potentially increasing tax revenues and allowing South Africa to escape the cycle of low growth and shrinking investor confidence.

Instead, we are left with a budget that prioritizes immediate tax collection over sustainable economic growth – a monumental missed opportunity.

Godongwana’s hubris in making such a significant decision without consultation showcases a minister out of fresh ideas.

If he cannot deliver a more effective budget that emphasizes economic growth rather than solely relying on tax increases, he should likely consider resigning.

If not, he should face dismissal.

Read our extensive coverage of the 2025 Budget here.

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