South African Budget Law Passed After Prolonged Political Deadlock

South Africa’s parliament approved the revised budget framework after coalition disputes, removing investor uncertainty and moving closer to full budget implementation.

South Africa’s parliament has taken a significant step forward by approving the fiscal framework and revenue proposals contained in the national budget, thereby eliminating a major source of uncertainty for investors in the continent’s most industrialised economy. This approval, which took place on Wednesday, signals a breakthrough after months of political gridlock and intra-governmental disagreements that had hindered the finalisation of the budget.

The budget process had faced repeated delays and required two substantial revisions due to deep divisions within the coalition government, particularly over the contentious proposal to raise value-added tax (VAT). This issue became a flashpoint, reflecting the broader tensions within the new multiparty arrangement that emerged after the African National Congress (ANC) lost its parliamentary majority in last year’s election for the first time in South Africa’s democratic history. The ANC was compelled to form a coalition with the Democratic Alliance (DA) and several smaller parties, which introduced new dynamics into legislative decision-making.

In Wednesday’s vote in the National Assembly, 268 lawmakers voted in support of the fiscal framework and revenue plans. This majority included representatives from both the ANC and the DA, the two largest political parties in the country. Meanwhile, 88 members opposed the proposals, and two abstained from voting. This marked a significant departure from previous years, when budget votes were largely symbolic due to the ANC’s uninterrupted control of parliament since 1994.

The budget's passage was not guaranteed until a critical compromise was reached. The ANC and the DA had been at odds over the proposed VAT increase, which the finance minister ultimately withdrew in a bid to unify the coalition behind the budget. With more than half the seats in the 400-member assembly held collectively by the ANC and DA, their eventual agreement was instrumental in securing the vote.

Ahead of the parliamentary session, Finance Minister Enoch Godongwana defended the revised budget, stressing that the retained tax measures were necessary to support vital social services, particularly in the health and education sectors. He highlighted that the third version of the budget aimed to balance the immediate need for social expenditure with long-term fiscal sustainability.

The DA, for its part, expressed conditional support for the fiscal framework, citing the focus on infrastructure development and efforts to introduce reforms in government spending as positive features of the budget. This alignment, albeit cautious, reflects a pragmatic approach within the coalition aimed at promoting economic stability and governance continuity.

Godongwana has consistently emphasised the importance of maintaining expenditure on frontline public services while also working to stabilise the nation’s rising public debt, which remains a concern for credit rating agencies monitoring South Africa’s economic outlook. His strategy seeks to reassure both domestic stakeholders and international investors that the government remains committed to fiscal discipline even in a challenging political environment.

Although Wednesday’s vote is a major milestone, the budget is not yet fully enacted. Parliament must still pass two additional pieces of legislation — the division of revenue bill, which outlines how funds are distributed between national, provincial, and local governments, and the appropriation bill, which authorises actual spending in line with the budget. The passage of these bills is necessary to complete the legislative process and put the national budget into full effect.