Third time lucky for Godongwana

A panel of South African lawmakers backed the National Treasury’s fiscal framework, the latest signal that the annual budget will finally win approval after twice being rejected by some members of the nation’s governing coalition. 

The National Assembly’s finance committee signed off on a report on the framework, which establishes economic policy, revenue projections and limits on government spending, at a sitting in Cape Town on Wednesday. It will now be referred to the legislature for approval. 

“I am sure it will pass because I have the numbers on my side this time,” Finance Minister Enoch Godongwana said in an interview in Cape Town.

South African bonds extended their gains, with the yield on the benchmark government rand bond that matures in 2035 falling 13 basis points, or 10%, by 3:00 p.m. in Johannesburg, heading for its lowest level on a closing basis since April 2022.   

Godongwana initially proposed raising value-added tax by two percentage points in his first iteration of the budget in February, but halved the increase three weeks later after encountering political opposition.

He scrapped it completely in his latest plan that was unveiled last month, and proposed cutting spending and increasing fuel levies instead. 

The Democratic Alliance, the second-largest member of the 10-party coalition that was established almost a year ago, led the campaign against the VAT hike and contested it in court.

The tussle over the budget strained the relations within the so-called government of national unity, and its resolution has eased concern among investors and helped fuel a rally in the rand and the nation’s bonds. 

The leftist Economic Freedom Fighters remains opposed to the higher fuel taxes, though the High Court on Tuesday dismissed the party’s lawsuit aimed at reversing them.

President Cyril Ramaphosa’s African National Congress has 159 of the 400 seats in the National Assembly, the business-friendly DA 87, former President Jacob Zuma’s uMkhonto weSizwe Party 59 and the EFF 39. The latter two parties aren’t part of the governing alliance.