In a historic and unexpected development, South Africa’s Finance Minister Enoch Godongwana’s 2025/26 Budget Speech was postponed on Wednesday, sparking widespread reactions in Parliament and causing economic ripples.
Why was the Budget Speech postponed?
National Assembly Speaker Thoko Didiza announced the delay, citing unresolved disagreements within the Government of National Unity (GNU) over the budget’s content, including a proposed 2% increase in Value-Added Tax (VAT).
The Budget Speech, initially scheduled for Wednesday, will now be delivered on 12 March 2025.
This marks the first time in South Africa’s democratic history that a national budget presentation has been postponed due to cabinet indecision.
Didiza stated that the executive only informed Parliament at 13:50 on the day of the address, noting that they “can’t find one another” and requested a postponement.
The delay followed an emergency cabinet meeting earlier in the day, during which members reportedly failed to reach consensus on budget specifics.
According to Daily Maverick, the delay reflects deeper divisions within the GNU, with Democratic Alliance (DA) cabinet members opposing aspects of the proposed budget.
Julius Malema, leader of the Economic Freedom Fighters (EFF), criticised the postponement, stating:
“This is not a practice we want to set forth in this Parliament… you are denying the people of South Africa to know what is going on in this government.”
Malema asserted that the budget’s proposed 2% VAT increase—from 15% to 17%—was a key point of contention.
Addressing the media, Minister Godongwana acknowledged the unusual circumstances.
“This is unprecedented. I usually have the confidence of Cabinet already having signed off,” he said.
Godongwana emphasised that while the budget is presented by the Finance Minister, it requires thorough cabinet approval before reaching the National Assembly.
Patricia de Lille, leader of the GOOD party, downplayed the apparent discord, stating, “All parties in the GNU agreed to the postponement, not just certain parties… Please don’t play politics with our people.”
Speaker Didiza echoed this sentiment, describing the situation as “unforeseen and unavoidable.”
How the South African rand reacted to the cancellation
The postponement of the Budget Speech had immediate financial implications, causing the South African rand to plummet.
The currency opened at R18.3298 to the US dollar and slid to R18.54 following the announcement, with an expected close at R18.5960.
This drop is a key indicator of investor concerns over the country’s economic stability and the potential fallout from government indecision.
Financial markets were rattled by the sudden lack of clarity on fiscal policy. The proposed 2% VAT increase, aimed at addressing budget shortfalls in education and social grants, was a focal point of disagreement.
The uncertainty around this measure, coupled with the unprecedented budget delay, contributed to the rand’s volatility.
Without a clear budget framework, businesses and investors face heightened uncertainty, potentially affecting economic forecasts and investment decisions.
The VAT proposal, which SARS Commissioner Ed Kieswetter had suggested might be less effective than improving tax administration, became a contentious issue in the GNU discussions.
Songezo Zibi, leader of Rise Mzansi, argued that the decision to postpone should have been made earlier, allowing for better preparation and communication with Parliament.
“If Cabinet and the GNU parties could not agree on the content of the budget, we should have been informed sooner,” he said.
Finance Minister Godongwana remained cautious about the situation, warning that the GNU era brings complexities to budget processes.
“Like Americans, there will be a lot of dilly-dallying,” he remarked, signalling that similar delays could occur in the future if cabinet consensus is not reached early.
As South Africa awaits the revised Budget Speech in March, the focus will remain on whether the GNU can bridge its differences and present a unified financial plan.
The performance of the rand in the coming weeks will likely hinge on how swiftly and transparently these issues are resolved.
