Budget 3.0: Where is Godongwana going to find R75 billion? — Expert weighs in

As Finance Minister Enoch Godongwana prepares to present budget 3.0, questions arise about where he will find R75 billion now that the proposed VAT hike has been cancelled.

Godongwana is expected to present the budget at 2pm on Wednesday, just hours before President Cyril Ramaphosa meets his United States counterpart, Donald Trump, in Washington to “reset” relations between the two countries.

With a R75 billion shortfall, there are two certainties in life, death and taxes, and it is possible that South Africans are expected to be taxed to death with VAT being off the table.

Money in the bank

Economist Dawie Roodt has told The Citizen, the government has a lot of money in the bank.

“Well, R75 billion is a lot of money, of course, but in the bigger scheme of things, it’s not that much. The minister of finance got cash in the bank of about R200 billion, which is usually lying there and can fluctuate to as much as R300 billion. So, it is a lot of money, but it’s basically R1 billion per month, and it’s actually really not that much”.

Roodt said the country “maxed out” as far as taxes are concerned.

“Can he make it up by increasing other taxes? The short answer is no, because the country has been maxed out as far as taxes are concerned, the major taxes like personal income, corporate taxes and company taxes are overdone, which is politically not acceptable.

“That leaves you with a couple of smaller taxes like the fuel levy, which is likely to be increased, and a couple of sin taxes and so on. But that’s not going to be enough to fill this hole,” Roodt said.

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Borrowing money  

Roodt said he thinks Godongwana is going to borrow more money to make up the shortfall.

“That is going to exacerbate the very bad debt position as it is already,

Roodt said the third thing Godongwana is going to try and do is cut back on state spending, which is “politically very difficult to do”.

“There are a couple of things that he must cut back on — state pending — but that’s difficult politically, like I said. For example, the wage increase for the civil servants in budget numbers one and two was set at 5.5%, which is just far too high.

“But unfortunately, most of those civil services are members of Cosatu [Congress of South African Trade Unions], and Cosatu is part of the tripartite alliance, and if you do not give them 5.5%, they’re going to trash the streets, so that’s very difficult,” Roodt said.

SA economy

Roodt said Godongwana gets the money for the budget from the economy.

“The economy has just not grown; I think we will be lucky if we see 1% growth this year. In budget one and two, the minister said economic growth is going to be 1.9 %. It’s not going to be 1.9%. We should be lacking if we see 1%.

“So it’s not really a matter of where he is going to get the money. He can get all the money provided the economy grows, and the economy is not going to grow, so that is actually the main issue here,” Roodt said.

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‘Political issue’

Roodt stressed that in terms of what the minister of finance has control over, the only thing he can do is to cut back on state spending, but politically, that’s very difficult to do.

“I’m afraid the ANC has painted itself into a horrible corner, and in the process, South Africa’s economy has been paying a very dear price because of the incompetent way that the South African economy has been mismanaged by the ANC government for 30 years.

“That’s our main issue.  So it’s not a revenue, it’s not even an economic issue. It’s a political issue because you’ve got a government with the wrong ideologies, the wrong policies, that is incompetent and quite often corrupt as well. You put all of that together, and you get a bad economy like what we have, and that means that you cannot get the necessary resources out of the economy because it’s just not grown,” Roodt said.

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