Dealing with the Budget Crisis: CDE recommendations
- The rejection of National Treasury’s proposed VAT increase last week was a crisis waiting to happen. Government has been living beyond its means for too long. For at least the last 15 years, it has spent significantly more than it raised in tax revenues, in the process driving debt levels from less than 25 per cent of GDP to more than 75 per cent.
- In response to the budget crisis of 2025, this short CDE report puts forward a realistic approach to enacting essential spending cuts and generating new revenue without a VAT increase.
- If we want to avoid repeating a fiscal crisis every year, the GNU must agree a growth compact before approving a new budget.
- CDE’ Agenda 2024 Action recommendations provide a good starting point for this compact on growth.
- Government should change procurement practices like set-asides and localisation requirements which inflate procurement costs. Savings could amount to R50 billion.
- In 2023/24 government set a precedent by allowing Eskom to cut out middlemen and contract directly with original equipment manufacturers, thereby overriding localisation requirements and helping to keep the lights on.
- Over R80 billion will be spent by the SETAs over the next three years. These funds should be redirected to the National Revenue Fund, and the SETAs and National Skills Fund should be shut down.
- Government should within the next six months review all payrolls to identify any “ghost workers”, coupled with a transparent report to parliament.
- To improve the efficiency of revenue collection, the GNU should immediately provide SARS with more resources so that it can pursue tax evaders and tax debtors.
- CDE proposes the establishment of a small Cabinet subcommittee consisting of members of at least the ANC and DA tasked with identifying and motivating for further expenditure cuts.
