Deputy President Paul Mashatile: Financial and Fiscal Commission 2025 Budget Roundtable

Programme Director, Ms Nosipho Nzube;
FFC Chairperson of the Finance Fiscal Commission, Dr Patience Nombeko Mbava, and Commissioners here present;
Chairpersons of the Standing Committee on Finance, Tatane Joe Maswanganyi;
Chairperson of the Select Committee on Finance, Ms Sanny Ndhlovu;
Chairperson of the Standing Committee on Appropriations, Mr Mmusi Maimane; 
Chairperson of the Select Committee on Appropriations, Ms Tidimalo Innocentia Legwase;
Chairperson of SCOPA, Mr Songezo Zibi; and 
Members of the above mentioned Committees here present;
Members of Provincial Executive Committees present:
Members of Political Parties and Organised Labour;
Representatives of Civil Society;
Representatives of various stakeholders, including Business; 
Members of Academia; and
Senior Government Officials;

I extend my greetings to every one of you.

Thank you for inviting me to participate in this 2025 Budget Roundtable discussion under the theme “Charting Fiscal Pathways: Collaborative Action for Equitable Growth and FFC Recommendation”.

Although I would have wanted to join you all in person, I was unable to do so because of prior commitments.

Nevertheless, I informed my office that I would not want to miss this roundtable discussion, even if I had to participate virtually.

For the first time, since the dawn of democracy, we experienced the postponement of the 2025 Budget Speech. However, subsequently, after a number of engagements with Political Parties represented in Parliament, the National Assembly adopted the 2025 Fiscal Framework and Revenue Proposals on 02 April 2025.

As we are all aware, the Fiscal Framework is one of the critical budgetary procedures that gives effect to the macro-economic policy of the National Executive, as determined by the Money Bills and Related Matters Act No.9 of 2009.

Just to give context: following the first Cabinet meeting, during which we agreed to postpone the budget presentation, in our subsequent Cabinet meeting President Cyril Ramaphosa appointed a Cabinet Committee, chaired by myself, comprising of Ministers Gondongwana, Steenhuisen, Mantashe, Gwarube, Creecy, and Motshekga. The task of this Committee was to find a solution to the VAT increase proposal by the Minister of Finance and the National Treasury. The committee did its work and agreed to the reduced 0.5% vat increase with the provision that we must invest in the implementation of the expenditure budget allocation so that we can address revenue constraints so that we avoid further tax increases.

As you are well aware that we have have gone through the first step of passing the 2025 Budget in Parliament with a simple majority, we are now focused on getting through the second stage of passing the Division of Revenue Bill, and the Appropriation Bill in May and June respectively. 

Programme Director,
The 2025 Budget process has taught us important lessons, especially those relating to improving transparency in decision-making processes. We have learnt that the current budgetary process is not transparent and inclusive enough, making it difficult for citizens to understand how Government goes about the process of taking some of the most critical decisions in allocation of resources albeit limited resources because of the competing needs.

In my considered view a transparent process is one that allows for public participation, scrutiny, and informed decision-making, ultimately leading to better resource allocation and improved service delivery to the citizenry.

In fact, the foremost lesson we have learned is that we need to return to the concept of the people's budget, this was advocated by Ben Turok, and Joanamarrie Fubbs. What this means is that we need fiscal planning that is inclusive from the start, in terms of the Medium Term Expenditure Framework, and in line with Government's priorities. In this case, the budget process as part of fiscal planning must focus on how we address the issues of poverty, unemployment, and inequality specifically.

Equally, the budget process should be governed by principles of equity, equality and non-discrimination. Public allocations should be fair, just and available to all citizens. Particular steps should be taken to ensure that vulnerable sectors of society are not discriminated against in budget planning processes, and when the national budget is presented.

Ladies and gentlemen,

The National Budget is the primary tool a government uses to plan and implement its policies, translating them into tangible deliverables and programmes. It provides the financial resources needed for essential public services such as education, healthcare, and defence, and it also allows for prioritisation of government spending based on socio-economic needs and political commitments.

Hence, passing a budget is not an easy task. I say this because I have first-hand experience from my time as the Chairperson of the Appropriations Committee and MEC for Finance.

During the period leading up to the budget speech and Medium Term Budget Policy Statement, I used to experience mixed feelings. This was because we had to deal with multiple competing needs when it came to the allocation of financial resources.

Even more so, the responsibility of leading the Treasury and its institutions is not a simple undertaking. The success in this area of work requires that we chart fiscal pathways, which involves planning and implementing macro-micro policy strategies to achieve our goal of building a non-racial, non-sexist, united, democratic, and prosperous society.

Together with the Minister of Finance, the Chairperson of the Portfolio Committee on Finance, the Select Committee and the Chairperson of the Appropriations Committee, we are tasked with the daunting duty of navigating the intricate domestic and international environment, and providing a healthy balance of the inherent competing interests.

Ladies and Gentlemen;
Prior to speaking about the domestic and global environments in which we operate, allow me to briefly outline the conditions that have led to our current situation. The outcome of the 2024 elections resulted in the formation of a Government of National Unity (GNU). The GNU is a coalition of 10 political parties out of the 18 political parties in the National Assembly.

In 2023 I convened a National Dialogue on Coalition Governments in response to the instability in municipalities caused by coalition governments that were not based on principled agreement. The outcome of that national dialogue resulted in the agreement on six principles, which were mainly agreed upon by the parties in the Sixth Parliament, namely:

• Putting the people first by making them the tenants of our value system in the formation of governments. In the spirit of Batho Pele, the measurement of the performance of coalitions must be about what we have done to improve the lives of the people for the better;
• Commitment to combating poverty and deprivation as well as building a growing and inclusive economy, and reporting regularly by providing evidence on poverty reduction, growing the economy, and including the majority in the mainstream economy;
• Contribute towards building a prosperous society in which people have access to land for productive purposes and are meaningfully participating in the economy;
• A commitment to building a non-racial, non-sexist, democratic, united, and prosperous society;
• Bound together by the commitment to good governance, with no tolerance for corruption!
• The party that has won the largest votes should be allowed to lead the coalition, and executive positions should be allocated proportional to the votes obtained by the coalition partners; there were varying views on this principle.

These have found expression in the recently adopted Statement of Intent by the political parties that formed the GNU. 

Having convened the National Dialogue on Coalition Governments, one of the critical lessons learnt is that coalition governments mainly collapse over disagreements on the budget, or stay together over budget agreements.

We were therefore not surprised that some in the GNU did not vote for the proposed 2025 Fiscal Framework. Hence, we have been arguing that you cannot be in Government, which you have not supported its budget especially after intense negotiations. When we enter negotiations we must know that we are about finding each other, hence we seek a win-win solution in the interest of taking our country forward. This is the environment that we are operating within; hence, our current macroeconomic and fiscal outlook.

It is important to recognise that, in contrast to other governments around the world that have collapsed due to fiscal disputes, South Africa successfully navigated the challenges.

The whole budgetary process has, among other factors, underscored that we have a strong democracy that is functioning effectively. Government remains committed to expanding economic growth while improving the quality of life for all citizens.

Ladies and gentlemen,

The high levels of poverty, unemployment and inequality persist despite policy interventions that our Government has introduced since 1994. For this reason, the 7th Administration has redirected its attention and priorities on:

Firstly, reconsider and make a commitment to investing in a growing economy, albeit inclusive growth.

Secondly, dealing with the cost of living as well as address developmental challenges and leaving no one behind.

Thirdly, focusing on building a capable, ethical, and developmental state with the capacity to redirect resources towards resolving poverty, unemployment, and inequality challenges.

The successful realisation of these interconnected outcomes requires a concerted effort on the part of the state, society, and, yes, and capital social compacting. We should collaborate with the aim of constructing the South Africa we desire.

Ladies and Gentlemen, another important task that requires planning, more importantly fiscal planning, and implementing financial strategies to achieve specific economic goals, is often related to debt management, government spending, and tax policies. 
This includes considering factors such as interest rates, economic growth, and structural reforms to ensure a stable and transparent macroeconomic environment. The goal here is to create a sustainable fiscal position that supports economic growth and manages risks effectively.

In this regard the following are key aspects of Charting Fiscal Pathways; 

Debt Management: focusing on managing government debt levels, including strategies to reduce debt-to-GDP ratios or ensure debt sustainability. 
Government Spending: this includes decisions about where and how government funds are allocated, prioritising investments in areas like infrastructure or social programmes while balancing fiscal responsibility. 
Introduction of Tax Policies: that are a key part of fiscal pathways, with governments making decisions on tax rates, structures, and revenue generation strategies to fund government operations. 
Focusing on Economic Growth: By supporting and promoting economic growth, with policies designed to stimulate demand, increase productivity, and encourage investment. 
Create a Macroeconomic Environment: toward creating a stable and predictable macroeconomic environment, which can include managing inflation, interest rates, and exchange rates to support overall economic stability. 
Introduction of Risk Management: Fiscal planning which involves identifying and managing potential risks, such as changes in interest rates, economic shocks, or unforeseen events, and developing contingency plans. For example, the International Monetary Fund has developed models that help countries analyse optimal fiscal paths by considering factors like interest rates and market sensitivity to debt. These models can guide policymakers in making decisions about fiscal adjustments to achieve desired outcomes.
Introduce Structural Reforms: such as streamlining regulations or improving public sector efficiency, as a key part of fiscal planning to enhance long-term growth and fiscal stability.

However, such requires sound macroeconomic policies and, in our case, requires socio-economic policies that are going to change the economy and ensure that many of our people are involved in the mainstream economy. The reality is that the 1994 protracted outcome resulted in the ANC taking state or political power; however, not the levers of the economy.

In that, there remains a limited diversification in economic activities which demonstrate lack of structural transformation, wherein the majority are not meaningfully contributing and participating in key growth economic sectors.

For the first fifteen years of the country's democratic rule, the economy grew at a rapid pace. However, over the past decade and a half, the country's economy has been marked by slow growth.

According to research published by the JSE in 2013, which included 271 listed companies, there is a direct 10% ownership and around 13% of Black ownership through institutional mandated funds.

The accumulation of these numbers is indicative of a lack of structural reform, which has led to the continuation of ownership patterns that remain in white hands.

Equally, three decades later, the economy is characterised by high levels of poverty and inequality. This is despite the policy interventions, such as the Broad-Based Black Economic Empowerment Act 53 of 2003 (BBBEE). Evidently, without the introduction of critical structural and transformative policies such as BBBEE, the economy will still largely be white and, in particular, white male dominated.

Therefore, structural transformation, has remained stubbornly elusive. This necessitates continuous intervention, also necessitates the rigorous implementation of policies that are designed to, among other things, cultivate Black industrialists, thereby increasing the participation of Black individuals in the entire value chain of the economy.

Industrialisation and reindustrialisation are therefore critical for driving and achieving sustainable social, institutional, and political economic changes. The focus on industrialisation and reindustrialization is predicated on localisation and beneficiation through the designated preferential procurement policy programmes.

These policy interventions are critical for structural transformation. 

Realising structural transformation necessitates a departure from conventional business practices. This business-unusual approach includes the speed of implementation, particularly the beneficiation policy or better-defined value-added processing, because beneficiation involves critical stages of large-scale, capital-intensive activities such as smelting and sophisticated refining plants, as well as labour-intensive processes such as craft jewellery, metal fabrication, and ceramic pottery.

Evidence exists, Ladies and Gentlemen, that there will be benefits for the country in implementing this policy intervention, and these include economic value, resource efficiency, and environmental benefits. For instance, China in 2013 introduced the Belt and Road Initiative, which is a global infrastructure. The programme involves investments in various infrastructure projects like roads, railways, ports, and energy pipelines to enhance connectivity, trade, and economic cooperation.

Therefore, we must learn from China and other nations by focussing on industrialisation and investing in infrastructure, as well as in Special Economic Zones. The creation of economic zones allows us to offer investment opportunities for both domestic and international investors. 

And for this, the timing is particularly opportune with the introduction of the Africa Free Continental Trade Agreement. We must equally take advantage of the position we hold in the Southern African Development Community (SADC) region and the fact that we are a gateway to the rest of the continent.

The Free Continental Trade Agreement is expected to boost intra-African trade by over 50% by 2035, boosting economic activity by reducing reliance on raw material exports and promoting value addition.

This agreement strengthens Africa's global trade position, attracting more foreign direct investment into manufacturing and infrastructure and reducing reliance on commodity exports, thereby promoting industrialisation and diverse industries.

As I conclude, Ladies and Gentlemen, in these trying times, it is critical that we work together to solve the serious economic concerns before us and strive towards solutions that benefit all sectors of society. Government will continue to cooperate with the Financial and Fiscal Commission (FFC) and to adhere to its advice on equitable revenue distribution and other financial and fiscal matters in accordance with its constitutional mandate.

In light of the FFC’s recommendations, we believe that improving transparency, especially with regard to the management of debt bailouts to state-owned enterprises (SOEs), which have substantially deteriorated South Africa's fiscal situation, will be essential to establishing fiscal confidence. We are committed to improving SOEs governance by extensively reviewing and streamlining their operational methods, a process that is well underway.

We equally welcome the FFC recommendation of a review and finalisation of the new Local Government White Paper, along with the review of the Local Government Fiscal Framework on how to appropriately finance local government, relative to their functions and their form.

This was also strongly raised earlier this year when I had the opportunity to engage with the South African Local Government Association's lekgotla in Cape Town. This recommendation has also been endorsed by the Minister of Finance when he delivered the 2025 Budget Speech.

We will never underestimate the FFC recommendations because they serve as a roadmap for us to navigate the economic situation and make sound decisions that will benefit our fiscal health.

I encourage everyone to approach today's conversations with an open mind, a spirit of cooperation, and a commitment to working towards a common goal of prosperity for all. Together, we can chart a fiscal pathway that leads to a more equitable and sustainable future.

I thank you.

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