Budget2025 deadlock: Can Treasury guarantee the payment of social grants?

Source: SASSA.

"The DA will not support the budget in its current form. We will continue to fight for economic growth and jobs," John Steenhuisen, Federal Leader of the Democratic Alliance (DA) said on Tuesday, 1 April 2025. He was speaking following a meeting of the Standing Committee on Finance on the fiscal framework.

"The ANC refused to finalise an agreement on growth and spending reforms, imperilling the GNU. The DA will oppose the budget unless and until a written agreement is reached," Steenhuisen said.

This is despite the African National Congress having secured the necessary support in parliament's Standing Committee on Finance with backing from ActionSA, a party outside the coalition. Steenhuisen accused the ANC of overstepping a boundary by relying on a party outside the coalition to secure fiscal framework approval.

In response, opposition party, the Economic Freedom Fighters (EFF), has requested that the National Assembly Speaker block the upcoming budget vote. The EFF argues that the previous committee proceedings were flawed.

Less than an hour before parliament was due to start voting on the fiscal framework, the DA party said on Wednesday afternoon (2 April, 2025), that talks with the ANC over passing the budget had reached an impasse.

"The conversations between the Democratic Alliance and the ANC (have) completely broken down. There is no conversation that is happening, and that is what South Africans must know," DA spokesperson Karabo Khakhau, said.

VAT proposal debated

Meanwhile, The ANC is deliberating the DA's proposed 0.5-percentage-point VAT increase this year instead of two hikes over two years. It has, however, excluded key DA demands, such as an expanded role for its deputy finance minister and an advisory committee on health insurance legislation, which the party opposes.

Originally on 12 March, the government had proposed a phased increase in the value-added tax (VAT) rate, raising it by half a percentage point in 2025/26 and another half a percentage point in 2026/27, bringing the rate to 16% by the latter year. At the same time, the government had planned to forgo inflationary adjustments to personal income tax brackets, rebates, and medical tax credits, effectively increasing the tax burden on individuals as wages rise.

Treasury calms concerns

National Treasury has since moved to assure the public that the delivery of critical government services, including among others, the payment of social grants, will not be affected as Parliament continues to consider the 2025 Budget.

In a statement issued on Wednesday, 2 April 2025 National Treasury referred to Section 29 of the Public Finance Management Act (PFMA), which allows funds to be withdrawn from the National Revenue Fund if the national annual budget is not passed before the start of the financial year.

“The funds withdrawn from the Revenue Fund may be utilised only for services for which funds were appropriated in the previous annual budget or adjustments budget. Up to 45% of the total amount appropriated in the previous annual budget, may be withdrawn from the Revenue Fund.“

During each month thereafter, up to 10% of the total amount appropriated in the previous annual budget, may be withdrawn. In aggregate, the amount withdrawn may not exceed the total amount appropriated in the previous annual budget," the department explained.

Spending continues temporarily

It added that these funds are not additional to funds appropriated for the relevant financial year, and "any funds withdrawn must be regarded as forming part of the funds appropriated in the annual budget for that financial year".

Although the financial year starts on 1 April, the department noted that the Appropriation Bill is always passed later.

"This situation means that every year, departments incur spending before the Appropriation Act takes effect. Therefore, as in previous years, government departments will continue to spend as normal because funds may be withdrawn from the National Revenue Fund for the requirements of departments, from 1 April 2025 until the Appropriation Bill for the 2025/26 financial year is passed by Parliament,” the department said.

"Although expenditure may be incurred, it may not be for new requirements. [This means] requirements not funded in the 2024/25 financial year. Any new spending programmes, projects or policy adjustments may only commence after the Appropriation Act is enacted."

Despite the flexibility allowed by the Public Finance Management Act, the National Treasury is committed to supporting Parliament in its consideration and timely passage of the 2025 Budget, the department said.