Masondo Views Budget 3.0 as a Done Deal

The Deputy Finance Minister of South Africa announced that the national budget set to be presented next week is anticipated to receive approval from lawmakers after two previous drafts were turned down due to conflicts within the ruling coalition over tax matters.

“I’m quite optimistic that we won’t see Budget 4.0,” David Masondo stated at an event in Cape Town on Thursday. His optimism is based on discussions held by the National Treasury with the Democratic Alliance, the coalition’s second-largest party, and other stakeholders. “I’m 100% sure that we’ll finalize it.”

Finance Minister Enoch Godongwana is scheduled to present the third version of the budget in Cape Town on 21 May.

Read: SA Budget 3.0 loading: Godongwana confirms 21 May

The DA opposed the proposal for increasing value-added tax, which led to deadlocks in earlier drafts. This raised investor concerns that the business-friendly party might leave the government, potentially paving the way for leftist factions like the Economic Freedom Fighters to step in and jeopardize economic reforms.

On 24 April, Godongwana withdrew the tax increase proposal, maintaining the coalition’s cohesion.

Masondo’s comments were echoed by Dean McPherson, a DA member and the Minister of Public Works and Infrastructure.

“I’m reasonably confident that an agreement will be reached on budget 3,” he stated in an interview during an event near Bothaville in the central Free State province on Thursday.

“I believe the political leaders have made considerable efforts to bring all parties closer together. I also think the lessons learned highlight the necessity for compromise and mutual concessions. We will see what unfolds next week, but I feel more hopeful and optimistic than I did previously.”

A coalition of ten parties assumed power following last year’s elections, marking the first time since the end of white-minority rule in 1994 that the African National Congress lost its absolute majority. This coalition was seen as a chance to boost job creation and stimulate growth after years of stagnation.

Lawmakers and the Treasury are under pressure to expedite the budget process, which must legally conclude by the end of July. After Godongwana’s proposal, parliamentary committees are required to approve reports on relevant legislation, which must then be voted on by the National Assembly.

Read:
Godongwana says no to wealth tax
Budget 3.0: Provincial budgets under scrutiny?

President Cyril Ramaphosa will participate in the budget presentation remotely, as he is traveling to the U.S. for discussions with American counterpart Donald Trump.

Inflation framework

Masondo also disclosed that the Treasury and the central bank are working on an appropriate inflation framework for South Africa, with an announcement expected soon.

The rand increased by as much as 1.1% against the dollar following his remarks, while the yield on benchmark 2035 government bonds fell by seven basis points to 10.48% – the lowest closing rate since 5 March.

The South African Reserve Bank’s current inflation target band is set between 3% and 6%; however, Governor Lesetja Kganyago has repeatedly indicated that a single-point target of 3% would align with South Africa’s peers, allowing for lower interest rates.

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