Rabia Mayet | rabiamayet@radioislam.co.za

20 May 2025

3-minute read

After the failure of two budgets leading to political and public outrage, Professor Raymond Parsons says that Finance Minister Enoch Godongwana is set to table ‘Budget 3.0’.

With the VAT hike called off, all parties are expected to give the go-ahead for the new budget. Professor Parsons believes that South Africans should not underestimate the “convergence of dynamics,” with the upcoming meeting between our president and US President Trump on the foreign policy front, the budget, and on the monetary policy side, the decision on interest rates by the Reserve Bank the following week.

The big controversy on VAT has opened up discussion on how to “balance the budget in a creditable and acceptable way.” The expectation by all sectors is that tomorrow’s budget, already endorsed by the GNU, will be widely accepted. In scrutinising and unpacking the budget, an essential question is whether we have learnt the lessons we need to around VAT and taxes.

To plug fiscal gaps and prevent Budget 4.0, the Minister will have to ensure that “no further borrowing” takes place, figure out how government can save money, recalibrate spending, and get SARS to generate more tax. To balance the books in the short term, Prof Parsons insists that we “move the needle on the growth rate,” and not jeopardise growth and employment rate with tax hikes. “Certain tough decisions need to be taken,” he says, especially with the recent announcement of Operation Vulindlela that will reflect in the budget. The real yardstick is to see how much of what was stated in the budget will be implemented on the structural side and get growth going so that further taxes don’t have to be instated.

“We’ve reached a red line,” as far as borrowing goes, he stated, with the National Treasury and all other departments in agreement that the government cannot borrow more to add to the current debt trap.

There have been robust and constructive discussions on both the revenue and the spending side, and no major surprises are expected in the budget. Professor Parsons concluded that the aim should be to produce a budget that is credible, reasonably balanced, has both long- and short-term solutions for South Africa’s fiscal challenges, is transparent, and leaves little room for shocks and unpleasant surprises.

Listen to the full interview here.