South Africa’s Budget 3.0 set to pass as coalition unites on tax plan

Key topicsBudget likely to pass after coalition resolves tax hike disputeTreasury drops VAT hike to keep DA in ruling allianceNew inflation framework coming soon, rand and bonds react positively.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Monique Vanek and Robert Brand.South Africa’s deputy finance minister said next week’s national budget is set to secure approval from lawmakers, after two previous iterations were scrapped because of disagreements within the governing coalition over taxes. “I’m very confident that we’re not going to have budget 4.0,” David Masondo said at an event in Cape Town on Thursday, a view that was based on talks the National Treasury has had with the Democratic Alliance, the coalition’s second-largest member, and other parties. “I’m 100% certain that we’ll get it over the line.” Finance Minister Enoch Godongwana will present a third version of the budget in Cape Town on May 21. The DA objected to plans to hike value-added tax, triggering standoffs over previous drafts. That raised investor fears that the business-friendly party might leave the government, which could provide an entry point for leftist groups like the Economic Freedom Fighters to join and place economic reforms in jeopardy.Godongwana withdrew the proposed tax increase on April 24, leaving the alliance intact.Masondo’s comments were backed up by Dean McPherson, a DA member and minister of public works and infrastructure.“I’m fairly confident that there will be agreement on budget 3,” he said in an interview at an event near Bothaville in the central Free State province on Thursday. “I think the political leaders have done a lot of work to bring people close together. I also think the lessons that’s been learned, there’s got to be compromise, there’s got to be give and take. We will see what happens next week, but I’m more hopeful and optimistic than I was previously.”.Read more:.South Africa scales back VAT hike in bid to end budget standoff.A 10-party alliance took power after elections last year in which the African National Congress lost its outright majority for the first time since White-minority rule ended in 1994. Its formation was heralded as a chance to boost job creation and feeble growth after years of under-performance. Lawmakers and the Treasury face a tight deadline to complete the budget process, which legally must be wrapped up by the end of July. After Godongwana tables his proposals, parliamentary committees will have to adopt reports on related legislation that must be voted on by the National Assembly.President Cyril Ramaphosa will attend the budget presentation remotely because he is traveling to the US for talks with his American counterpart Donald Trump. Masondo also announced that the Treasury and the central bank are working on an appropriate inflation framework for South Africa, with an announcement to be made soon.The rand gained as much as 1.1% against the dollar after he made those comments, while the yield on benchmark 2035 government bonds fell seven basis points to 10.48% — the lowest on a closing basis since March 5.The bank’s current inflation-target band is 3% to 6%, but Governor Lesetja Kganyago has repeatedly said that a single-point target of 3% would be in line with South Africa’s peers and allow for lower interest rates. © 2025 Bloomberg L.P..Leader of South Africa’s DA lauds new Budget as ‘credible’.By Rene VollgraaffThe head of South Africa’s second-biggest political party said talks about the nation’s revamped budget “are going very, very well,” a signal that the coalition government is resolving differences that derailed the National Treasury’s previous tax and spending proposals. What Finance Minister Enoch Godongwana “has succeeded in doing is a very good balancing act and I think we’re going to see a budget that will pass the house quite easily,” John Steenhuisen told reporters at the Nampo Harvest Day expo in the central Free State province Friday.“We have to see it in its final form, but certainly, what I’ve seen today, I’m incredibly comfortable with,” he said of the third iteration of the budget proposals. “We’ll see no extra borrowing and no extra taxation.”Steenhuisen’s comments follow an assertion by Deputy Finance Minister David Masondo on Thursday that he is “very confident that we’re not going to have budget 4.0” and that lawmakers will approve the proposals that they will hear on May 21.The rand strengthened past 18 to the dollar for the first time since December earlier Friday, reaching 17.99. Last year’s election failed to produce an outright winner, with the African National Congress setting up a 10-party coalition in June, a month after the vote in which it lost parliamentary majority it had held since apartheid ended in 1994. The DA and African National Congress have since February sparred over issues including the Treasury’s proposal to hike value-added tax — all of which raised questions about the alliance’s durability. Tensions escalated last month, when the ANC enlisted the backing of parties that aren’t part of the coalition to pass the fiscal framework — legislation that underpins the budget — after the DA withheld its support. The DA then filed a lawsuit contesting the adoption of the legislation on procedural grounds.The Treasury backed down, saying it would scrap the planned VAT hike, cut spending to fill a 75 billion-rand ($4.2 billion) gap in the budget over the next three years, and seek to settle the court case with the DA. Lawmakers and the Treasury face a tight deadline to complete the budget process, which legally must be wrapped up by the end of July. After Godongwana tables his proposals, parliamentary committees will have to adopt reports on related legislation that must be voted on by the National Assembly.Earlier, Steenhuisen said Godongwana has made a “wonderful presentation” on the budget. “I think we’re certainly getting there.”“There really is a sense of collaboration and working together to put on the table a credible budget that will be a strong stable platform for us to go out and seek confidence from our investors and also to start growing the economy and creating jobs here in South Africa,” Steenhuisen added. .© 2025 Bloomberg L.P.

South Africa’s Budget 3.0 set to pass as coalition unites on tax plan

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