MANDY WIENER | What a difference a year makes

He reminded us that the outlook was stark.

“State Capture had hollowed out critical institutions and weakened state-owned entities. South Africa had been downgraded to junk status by the last of the three major credit rating agencies in 2020. The devastation of the coronavirus pandemic, coupled with the Russia-Ukraine conflict had dealt a blow to global growth. And then, in 2023, the Financial Action Task Force had placed South Africa on its grey list,” said the Minister.

The warning lights were flashing. Public finances were under severe strain, and growth had stalled.

If we go back just one year to February 2025, the finance minister didn’t even get an opportunity to table his budget because of political turmoil in the fledgling Government of National Unity (GNU).

For months, political wrangling over the budget delayed its introduction, and the fiscal instability was profoundly worrying.

It reached the point where the President addressed the ANC caucus, putting the DA and the GNU on terms. It came to the brink, and an obituary of the GNU was being written just nine months into its existence.

What a difference a year makes.

This week, the Minister delivered his budget speech in a far more stable political climate.

Instead of hiking VAT, the shock factor which had resulted in the political furore a year prior, he was able to withdraw the R20 billion in tax increases provisionally included in the May 2025 budget.

The gross tax revenue had been revised up by R21.3 billion, and an improved fiscal position allowed the treasury the wiggle room.

Additional tax measures to ease the financial burden on households were also introduced by adjusting the tax brackets for inflation.

To be fair, this position was only possible because of a commodities windfall, a rally in gold and a weakened dollar. Our South African bonds have had a great run.

But it goes to show the value of political stability and how much things have changed in a year. The GNU is holding, and there are greater consultation and collaboration on policy decisions.

In an interview with Moneyweb, Deputy Finance Minister Ashor Sarupen, who is from the DA, explained how the entire budget process has been reformed so that political parties in the GNU could have a say up front very early on.

“We started this process quite early on and had six weeks of consultation to get to this point where we could table a budget without too much trauma or drama – and get one that is well received by the markets, well received by business and, more importantly, well received by households. Of course, last year we were looking at, as you described, the 2% VAT hike that left everyone stunned. This year, we’ve withdrawn the proposal on R20 billion in tax hikes, and we’ve actually done a whole lot of tax relief. So, it’s quite the opposite of where we were last year.

“I think by properly having that discussion and thrashing it out in the government, we got to a point where we produced something that, despite the complexities of trying to keep everyone happy – and of course there are trade-offs and not everyone can be happy – I think we’ve produced something that provides South Africa with maximum fiscal credibility within our constraints. And I think that that’s the most important thing,” said Sarupen to Moneyweb.

A stable political climate enabled by a solid GNU has also allowed the private sector to step up its contribution, thanks to reduced regulation and public-private partnerships.

At a conference recently, I listened to Martin Kingston, who leads the B4SA campaign between business and government.

He set out the contribution being made through Operation Vulindlela. In the spheres of energy, transport and logistics and crime and corruption, these have been profound.

New generation being added to the grid, an increase in the Energy Availability Factor at Eskom, an end to loadshedding, privatisation of rail corridors, port handling times reduced considerably, Durban Pier 2 privatised, getting off the FATF grey list and the establishment of a digital evidence unit. These are all significant developments.

While the finance minister acknowledges that the country has turned a corner in its management of public finances, the reality has not changed for millions of South Africans who remain unemployed. Economic growth remains well below the global average, and the government acknowledges that much more needs to be done to grow the economy.

We have come a long way in a year. We have come an even longer way in five years since the dark days of state capture and COVID.

But we have a long way to go.