Finance minister sets 45% spending cap ahead of new budget

Provinces and municipalities are allowed to spend 45% of last year’s fiscus before the retabling of a new national budget without VAT in the next month.

This was announced by Finance Minister Enoch Godongwana this afternoon (Wednesday), informing all stakeholders that National Treasury will retable the 2025 Budget Review on Wednesday, 21 May.

The comprehensive review will include the Fiscal Framework, Appropriation Bill, Division of Revenue Bill, and the already-tabled Rates and Monetary Amounts and Amendment of Revenue Laws Bill.

ALSO READ: Contentious VAT hike scrapped

This decision follows Godongwana’s recent announcement and subsequent request to the speaker of the National Assembly to maintain the VAT rate at its current level of 15%, reversing the previously proposed 0.5 percentage point increase presented in the previous budget.

“The revised budget will adhere to all established technical processes and consultations as set out in the Money Bills and Related Matters Act.

“This includes formal consultations with the financial and fiscal commission, thorough consultations with all political parties within the GNU, as well as Cabinet approval before presentation to Parliament,” said Godongwana.

He added that until the new budget is passed, government services will continue to be funded under Section 29 of the Public Finance Management Act.

“This allows spending of up to 45% of last year’s budget during the first four months, and up to 10% for each month after that.

“While we wait for the 2025 Division of Revenue Act to be passed, funding for provinces and municipalities will continue under the 2024 Act, allowing transfers of up to 45% of their allocated funds,” said Godongwana.

He added that, while the postponement of the budget’s passage is not ideal, the circumstances leading to this decision have highlighted the importance of meaningful engagement on fiscal matters.

ALSO READ: 2025 Budget breakdown: VAT, grant increases unpacked

“This situation has provided a valuable opportunity for all stakeholders citizens, members of parliament, labour organisations, and civil society to thoroughly engage with the complex challenge of achieving fiscal sustainability while promoting economic growth and protecting essential public services within very limited resources,” said Godongwana.

He said National Treasury has already commenced work on developing a new fiscal framework that will maintain the country’s trajectory toward debt stabilisation, a crucial element in strengthening the public finances.

Don’t have the ZO app? Download it to your Android or Apple device here:

HAVE YOUR SAY