The budget finally tabled on March 12 isn’t just disappointing — it’s dangerous. It marks a shift in fiscal strategy and sets SA on a riskier path, with more spending, more taxes and a series of questionable assumptions holding the numbers together.

This isn’t the budget that was supposed to be presented in February. That one was pulled at the last minute when the cabinet rejected the finance minister’s decision to raise VAT by two percentage points.

The March budget is a modified version of what was originally proposed — slightly lower spending and slightly lower taxes than the February “non-budget”, but still a budget that abandons spending restraint in favour of raising taxes to deal with the rising costs of government’s programmes.

But the story isn’t the last-minute changes. It’s the bigger shift in strategy between October’s medium-term budget policy statement (MTBPS) and (both versions of) this budget.

In the MTBPS the finance minister tried to keep spending under control as the key mechanism for getting public debt on to a more sustainable path. In this budget, the Treasury throws that out and raises taxes to support higher spending. Debt levels don’t change all that much from those foreshadowed in the MTBPS, but the government will be spending more and taxing more than the MTBPS proposed.

This is a critical shift. For years the National Treasury was a brake on the ANC’s fiscal populism. It wasn’t perfect, but there was at least an attempt to keep debt in check. That came at a political cost. Many in the government and civil society turned on the Treasury, accusing it of being “captured” by neoliberalism or of blocking poverty reduction.

At the same time these critics, while advocating for a far more aggressive approach to raising spending and tax rates, dismissed the risks and costs of higher debt. Their approach, they claimed, would not just reduce poverty but spark growth. In our view the Treasury was right to worry about this approach.

Higher levels of public spending are not a free lunch, and the economy can’t absorb endless tax increases and rising debt without consequences. These negative consequences come in the form of less investment, slower growth, more inflation and higher interest rates. Raising taxes to fund redistribution sounds simple, but it slows the economy, drives away investment and ultimately undermines the services people care about most. This is all the more certain when the government is inefficient and riddled with corruption and ineptitude.

Until October 2024 the Treasury tried to balance these competing pressures. But this budget shows it has lost that battle. Compared to the MTBPS the new plan increases spending by nearly R220bn over three years and raises taxes by R170bn by increasing VAT and an effective increase in personal income tax. That is a fundamental change in direction.

A further risk with this budget is that the numbers do not add up.  No money is set aside for bailouts to state-owned companies (SOCs), despite years of evidence that they will be needed. The Treasury may want to incentivise reform by withholding bailouts on paper, but we’ve seen this movie before. When the time comes the money gets spent — whether it’s Eskom, Transnet or even smaller, less strategic entities such as SA Express.

Then there’s the revenue side. The budget assumes GDP growth will rise meaningfully over the next three years. But outside the post-Covid rebound, the rate at which GDP is increasing has been trending down since 2009. If that trend continues the tax revenue will fall short of projections. Which means more borrowing.

This isn’t a minor accounting issue. Every tax hike since the mid-2010s has underperformed, forcing the Treasury to fill the gap with more debt. If history repeats, we’ll face the same squeeze again. In short, this budget depends on unrealistic expectations while also projecting revenue that likely won’t materialise. This represents a dangerous sea change in policy.

Some argue this change was inevitable. After years of austerity service delivery has collapsed in many places. The public sector — especially at the front line — is under immense strain. Something had to give, they say. That may be true, but what this argument ignores or underplays is why service delivery has collapsed.

Right now the problem isn’t just the lack of money — it’s mismanagement, waste and corruption, compounded by weak leadership in most state departments and institutions. Pouring more money into broken systems won’t fix them. It may even make things worse by reinforcing failure.

Education and health are prime examples. These are critical services, but they are failing millions of South Africans despite already consuming large shares of the budget. Without structural reform and serious, bone-deep accountability for performance, more spending won’t solve the core problems.

The same applies to SOCs. For years they have absorbed billions in bailouts without fixing underlying issues. As long as that continues, increasing spending on them isn’t a solution — it’s a liability.

So we’re left with a bad budget that not only reflects poor choices but also opens the door to even worse ones. Once the principle of fiscal restraint (however loosely it was applied) is abandoned, it will be harder to reimpose. Worse: parliament is unlikely to improve this budget. If anything, pressures from within the ANC, EFF and MK will push for even more spending and even less fiscal discipline.

The finance minister may believe he’s found a middle path. In reality, the new budget has set a precedent that may be difficult to reverse. The spending review process, presented as a safeguard, isn’t enough. Right now, it’s a vague, closed-door conversation between the Treasury and the presidency. That’s not accountability. It needs to be a formal process, led by a cabinet-level committee involving at least the ANC and the DA. There should be clear deadlines, transparent goals, public accountability and a serious plan to speedily eliminate waste.

Critically, it also needs to identify policies that are not worth what we pay for them. Whether it’s bloated wage bills, failing programmes or broken procurement systems that drive up costs, we can’t keep avoiding tough decisions. By accommodating all of those costs this budget doesn’t just dodge those questions, it makes the problems harder to fix.

In the end the problem with this budget is that it breaks with a hard-won practice of fiscal restraint and replaces it with a politically expedient but economically dangerous plan. It assumes things that won’t happen, ignores risks that will materialise, and shifts resources into systems that aren’t working.

We need to change course. And we need to do it with great speed. The fundamental change SA needs will require more than a tweak here or there. It means rethinking the whole approach — and recognising that throwing money at broken institutions is not a path to growth, stability or sustainable service delivery.

• Bernstein is executive director of the Centre for Development and Enterprise. This piece draws from a new report,“Dealing with the Budget Crisis: CDE Recommendations”.

NOTE: This article has been modified. The original, published text included the claim that the budget made no provision for the SRD grant after March 2026. That was an error: the budget does make provision for the SRD for all three years of the medium-term expenditure framework.