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20 February 2025 Photo Supplied
Prof Johan Coetzee
Prof Johan Coetzee, Chairperson: Department of Economics and Finance, University of the Free State.

Opinion article by Prof Johan Coetzee (MCBI, CMBE), Chairperson: Department of Economics and Finance, University of the Free State.

The Minister of Finance has not had it easy in 2025 and the budget speech not read yesterday pays testament to this. Postponing the speech to 12 March is unprecedented, and is due to the Government of National Unity (GNU) not reaching consensus on a way forward to tabling a budget. It seems as if the fallout was based largely on a proposed 2% increase to VAT that was rejected by two parties. I personally would not have supported this proposal either as the tax burden shifts disproportionally to the poor.

My initial response of the postponement was frustration and disappointment. But I soon realised that it is the outcome of a new government dispensation made up of many voices, and many dissenting at that, becoming more important. In principle, this is good for the nation, but unfortunate for us expecting the budget to be read on the day. It also does not necessarily send a good message to the markets, with the rand weakening by more than 1% within an hour of the announcement. There could also be knock-on effects that a later tabling will have on service delivery and operations of government. After some reflection, however, I have concluded that on balance, the decision to postpone is not as problematic as many have made it out to be over the past 24 hours. Clearly there are many balls to juggle by Minister Enoch Godongwana and many added complexities that have both national and international dimensions.

Lead-up to the budget

Internationally the strong nationalist policy drive by US President Donald Trump has already shown that the ‘make America great again’ mantra is alive and well as reflected in the intentional actions taken against South Africa since his second term started in January. We will see how this plays out over the coming months, but my view is that South Africa as a nation needs to be more deliberate in its policy agenda. We are at an inflection point where we must reflect on who we are as a nation and where we want to be down the line. We cannot afford to rely on handouts from other nations. There is more opportunity to this situation than threat, but we need intentional leadership to exploit it.

My big concern in the lead-up to the budget speech was that the minister would not take a firm stand on fighting the culture of non-compliance within state entities which has invariably led to unsustainable levels of irregular expenditure. For the 2023/24 financial year, the Auditor-General of South Africa reported that irregular expenditure totalled almost R50 billion, up from just over R27 billion the previous year. To put this into perspective, irregular expenditure equals approximately 2.2% of total government spending for the 2023/24 fiscal year. This might not seem significant stated as a percentage, but it has basically doubled since the previous year, and every preceding year before that too. Moreover, irregular expenditure equates to approximately 20% of the 2023/24 social grants budget and just about equals the 2024 National Student Financial Aid Scheme allocation. This is clearly a management failure and nothing seems to have been done about it over the years. As a result, the problem is escalating at an alarming rate. It is quite astounding that accountability management is not more explicit as it is clearly a very unpopular political message to send. But at what cost?

South African economy is not growing

To make matters worse, the South African economy is not growing both enough and fast enough. The most recent real GDP growth figure showed a decrease of 0.3% in the third quarter from the second quarter of 2024. Since 1994, the period with the highest annual rate of growth was a three-year period from 2005 to 2007 where growth exceeded 5% for each respective year. This period preceded the global financial crisis and since then, growth has struggled to reach 3% annually, doing so on only two occasions barring the 4.7% in 2021 which was not a true reflection of reality given the low base of the preceding year amid the COVID-19 pandemic. This is a major concern for the Minister, because with economic growth comes increased tax revenues, which in turn capacitates better budget management. Very simply, the more people spend; the more businesses sell; the larger the profit outcomes; the larger the tax revenue collections. If the economy grows, the fiscus collects more tax revenues without explicitly increasing tax rates. This built-in cyclical dynamic is simply not happening and creates a serious constraint on the ability of the Minister to manage deficits going forward.

Further to this of course is that as deficits are run, all things remaining constant, public debt increases. The public-debt-to-GDP ratio for 2023/24 already exceeds 72% which is higher than the generally accepted benchmark of 60% and almost 2.6 times what it was in 2008 (27.8%). This has resulted in the average interest on public debt approximating R1.1 billion a day, equating to about 22% of total tax revenues, or almost 20% of total government spending respectively. To put it differently, for every R1 government spends, 20 cents is first channelled to pay the interest on the debt before any spending occurs on roads, education, infrastructure, social grants and the like. These are deeply concerning figures in an economy with already high levels of unemployment and inequality.

Might be beginning of something better

There is a leadership void that cannot be ignored anymore. It needs to be intentional and deliberate. The GNU provides the platform to exploit ‘the best that South Africa has to offer’ as it promotes a broad-based and more inclusive political structure and played itself out yesterday. I welcome this in principle, but my concern is that political in-fighting will prevail and perverse politicking will trump working together in the best interests of the South African people. Although the postponement could be interpreted negatively in terms of the GNU not being able to find common ground, I think it is rather a sign of more rigorous engagement and the enablement of a collaborative environment amongst parties in the decision-making structures of the state. Remember this day as it might be the beginning of something better than what we are used to. 

News Archive

Twenty years of the constitution of South Africa – cause for celebration and reflection
2016-05-11

Description: Judge Azar Cachalia Tags: Judge Azar Cachalia

Judge Azar Cachalia

The University of the Free State’s Centre for Human Rights and the Faculty of Law held the celebration of the twentieth anniversary of the adoption of the South African Constitution on 11 May 2016 on the Bloemfontein Campus.  Students and faculty members celebrated and reflected on not only the achievements of the constitution but also on perspectives regarding its relevance in modern society, and to what extent it has upheld the human rights of all citizens of South Africa.

The panel discussion started with a presentation on the pre-1996 perspective by Judge Azar Cachalia of the Supreme Court of Appeal.  Judge Cachalia reflected on his role in the realisation and upholding of the constitution, from his days as a student activist, then as an attorney representing detainees during political turmoil, and currently as a judge: “My role as an attorney was to defend people arrested for public violence. My role as a judge today is to uphold the constitution.”  He stressed the importance of the constitution today, and the responsibility institutions such as the police service have in upholding human rights.  Judge Cachalia played a significant role in drafting the new Police Act around 1990, an Act which was to ensure that the offences perpetrated by the police during apartheid did not continue in the current democratic era. Further, he pointed out that societal turmoil has the potential to make society forget about the hard work that was put into structures upholding human rights. “Constitutions are drafted in moments of calm.  It is a living document, and we hope it is not torn up when we go through social conflict, such as we are experiencing at present.”

Thobeka Dywili, a Law student at the UFS, presented her views from the new generation’s perspective.  She relayed her experience as a student teaching human rights at schools in disadvantaged communities. She realised that, although the youth are quite aware of their basic human rights, after so many years of democracy, “women and children are still seen as previously disadvantaged when they should be equal”. She pointed out that, with the changing times, the constitution needs to be looked at with a new set of eyes, suggesting more robust youth engagement on topics that affect them, using technology to facilitate discussions. She said with the help of social media, it is possible for a simple discussion to become a revolution; #feesmustfall was a case in point.

Critical perspectives on the constitution were presented by Tsepo Madlingozi of University of Pretoria and University of London. In his view, the constitution has not affected policy to the extent that it should, with great disparities in our society and glaring issues, such as lack of housing for the majority of the poor.  “Celebration of the constitution should be muted, as the constitution is based on a decolonisation approach, and does not directly address the needs of the poor. The Constitutional Court is not pro-poor.”  He posed the question of whether twenty years on, the present government has crafted a new society successfully.  “We have moved from apartheid to neo-apartheid, as black elites assimilate into the white world, and the two worlds that exist have not been able to stand together as a reflection of what the constitution stands for.”

Prof Caroline Nicholson, Dean of the Faculty of Law, encouraged more open discussions, saying such dialogues are exactly what was intended by the Centre for Human Rights. She emphasised the importance of exchanging ideas, of allowing people to speak freely, and of sharing perspectives on important issues such as the constitution and human rights.

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