S.Africa rand weakens as budget disagreements remain

The South African rand fell as disagreements in the ruling coalition persisted despite the finance minister making concessions in a revised budget. The new budget proposed raising VAT by 0.5 percentage point this year and another 0.5 percentage point next year. In addition, the second-biggest party in the coalition, the Democratic Alliance, said it did not support the latest budget. For more on the reported differences between the parties, CNBC Africa’s Palesa Mofokeng spoke to Finance Minister Enoch Godongwana.

Wed, 12 Mar 2025 16:49:55 GMT

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AI Generated Summary

Disagreements persist within the ruling coalition despite Finance Minister Godongwana's concessions in the revised budget, leading to a decline in the rand's value.
The budget proposal includes a VAT increase, triggering differing stances within the coalition, notably with the Democratic Alliance expressing non-support.
Minister Godongwana emphasizes ongoing dialogue and collaboration to navigate economic challenges, outlines factors influencing the 1.8 percent growth projection over the next two years.

South Africa's currency, the rand, faced a decline as disagreements within the ruling coalition persisted despite Finance Minister Enoch Godongwana making concessions in the revised budget presented to Parliament. The budget proposed an increase in the value-added tax by 0.5 percentage points this year and an additional 0.5 percentage points next year. However, the second-largest party in the coalition, the Democratic Alliance, expressed its lack of support for the latest budget, highlighting the challenges faced in reaching consensus. In an exclusive interview with CNBC Africa's Palesa Mofokeng, Minister Godongwana addressed concerns and shed light on the consultative process that led to the budget's formulation. The budget, which some may view as a GNU budget due to the multi-party government's dynamics, encountered delays three weeks ago stemming from disagreements within the coalition. Minister Godongwana acknowledged the varying opinions within the coalition and emphasized the need for ongoing dialogue and collaboration to address the country's economic challenges. Discussing the ambitious reform agenda outlined in the budget, Minister Godongwana recognized the time and effort required for reforms to take effect, noting potential resistance to change. Despite the reform process's complexities, he remained optimistic about South Africa's economic growth prospects, projecting a 1.8 percent annual average growth over the next two years. The Minister cited key factors such as effective implementation of the reform program, reliable electricity supply, efficient logistics, and a supportive global environment as foundational to achieving the growth forecast. As South Africa navigates economic uncertainties and political differences, stakeholders look to the government for cohesive and strategic policymaking to drive sustainable growth and stability.