Cabinet rejects second Budget proposal as South Africa's fiscal crisis deepens

CABINET has again reportedly rejected a reworked Budget, this time without the 2% VAT increase, telling Finance Minister Enoch Godongwana that this will not work for the people.

President Cyril Ramaphosa called a special Cabinet meeting on Monday to deliberate on the uncertain Budget. This is where Godongwana presented his other Budget idea.

This is the second time in a week that the Cabinet has rejected the budget.

Prior to Wednesday's presentation of the first budget, which included planned tax rises, the ministers were against it.

The Budget was moved to March 12 after parties failed to agree on the budget.

A source within the Cabinet told IOL that it was not an easy matter to deal with because this had already painted a bad image of the minister.

The immediate response was to resolve the matter, set up a subcommittee that would look into the matter but with the help of Cabinet. According to the source, this would be chaired by Deputy President Paul Mashatile.

“The full details will be known ... remember this thing is still ongoing and we cannot just speak to it as if decisions have been made,” the source said.

Despite the conflicts, another source said the Budget would still be tabled next month.

Cabinet spokesperson and Minister in the Presidency Khumbudzo Ntshavheni tweeted that this was fake news. IOL tried to get a comment from her but to no avail.

Responding to the claims, Ntshavheni’s Media Liaison Officer (MLO) Sipho Mbele said: “I don’t think the minister will respond to that … That is fake news … Broer, I am in a meeting.” He hung up the call without any hesitation.

“We are still working on it, but we should reach consensus on time,” the source said.

In a six-hour discussion, Godongwana told participants that the budget without VAT increases essentially limited the extent of the suggested increases to departments that he had originally intended to mention in his speech.

Some of the proposed budget cuts included the R29 billion over the Medium-Term Expenditure Framework (MTEF). This reduction would impact the hiring of unemployed doctors and the provision of related healthcare services.

This proposed cut would prevent 11,000 teachers from being hired, which would have an impact on funding for early childhood development initiatives required by the Basic Education Laws Amendment (BELA) Act.

The R2 billion cut for prison warders lowers the amount of money available for correctional facility staffing.

R23 billion has been set aside for government employee pay hikes: This cut affected a 5.5% pay raise that would have been granted to public sector workers.

The Department of Defence would have used the R13 billion savings to pay salaries and make it easier to recruit younger people into the armed forces.

South Africa's deployment to the Democratic Republic of the Congo (DRC) was also allocated about R5 billion.

According to the source, the South African National Defence Force has had to rely significantly on its reserve force because of deployments that were not factored into the initial budget.

“We are still trying to make sure that we come with the best budget. I mean, look at all the cuts that have been made, look at the military budget, is it really fair?

“The military is in a dire state because of the cuts. You are the best in Africa, but your military is not a story, does it make sense? But yes, we will come up with something,” the source said.

The Treasury also suggested deferring the government's payment to the Government Employees Pension Fund by a year.

It was believed that unions would fiercely resist this move, which would free R53 billion in funding.

IOL