ANC confronts budget battle as GNU faces its first test

It is unlikely that the South African government will grind to a halt if adoption of the budget remains up in the air.

Unlike in the United States, where disagreement over budgets can grind the country to a halt, it will be closer to a slow bleed.

The South African government can continue without a budget temporarily, said economist Dawie Roodt. South African law provides for interim spending to avoid an immediate halt in services.

Govt can continut without budget temporarily

However, no money can be withdrawn from the National Revenue Fund, except in terms of an Act of Parliament. This means an approved budget is required to legally spend public money.

But if the new budget isn’t in place by the start of the fiscal year, a special provision kicks in rather than an outright shutdown.

The Public Finance Management Act allows interim funding to sustain government operations. During the first four months after a delayed budget, up to 45% of the prior year’s budget can be used.

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Thereafter, the government can withdraw up to 10% per month until the new budget is passed, provided the total amount spent does not exceed the prior year’s approved budget.

Roodt said should no budget be passed, municipalities will run out of funding first.

“This will happen by around June, I expect,” he said.

NCOP must debate, adopt and pass

“State-owned companies dependent on funding will follow, along with other government departments by about October if the process is delayed that long.”

The National Assembly and the National Council of Provinces (NCOP) must debate, adopt and pass the budget.

Each government department’s budget allocation will be presented and debated in parliamentary committees that oversee specific sectors, such as the portfolio committee on health.

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These committees will scrutinise how departments plan to utilise their budgets, whether they met previous financial commitments, and whether taxpayer funds were spent responsibly, based on their annual performance reports.

Once all budget votes have been debated in mini-plenaries, both houses of parliament must vote on the full budget. If approved, departments can proceed with their allocated spending.

However, if the budget is rejected by both the National Assembly and the NCOP, the government could be forced to resign, triggering an election to form a new administration.

If budget is rejected, govt could be forced to resign

And, if DA leader John Steenhuisen’s hardline on this week’s budget proposal is anything to go by, it will take a lot longer to be approved.

While the lower VAT increase proposed along with creeping tax brackets and spending, Steenhuisen said his party will vote against the budget if no agreement is reached.

He added the budget can be amended by parliament.

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“Or the GNU partners can find agreement before the budget instruments are tabled. An adjustment budget is also possible later in the month,” he said.

The budget, analysts have speculated, was the first true test of the GNU.

It’s also the first time in more than 30 years that the ANC-led government faced a showdown of this nature.

First showdown on this nature for ANC govt

Steenhuisen said this was probably the first instance where the ANC realised that it didn’t actually have the majority.

“It’s the first time that the ANC have realised they have to work with their partners to get things done,” he said.

Roodt said the biggest takeout for the ANC from the unfolding events must be that “they cannot keep overspending like they have been doing in the past. There are checks and balances in place now.”

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Wayne Duvenage, of the Organisation Undoing Tax Abuse, previously said that before government places yet a greater burden on citizens and businesses, “government should focus on fixing the billions lost due to mismanagement”.

Roodt said the budget ping-pong has had a positive consequence.

“It has made South Africans far more aware of the process and that can only be good for the democratic process.”