Fractured treasury: Do biases and ideology trump evidence-based reasoning?

We have now had sufficient time to digest, and reflect on, the 2025 budget proposal, presented by Finance Minister Enoch Godongwana on 12 March. The budget presents a paradoxical blend, marrying laudable initiatives — enhanced public services, prudent spending and infrastructure boosts — with contentious elements, including a VAT hike, bracket creep and a lacklustre 1.9% growth forecast. 

The battleground has now shifted to parliament, with political parties in intense negotiations, the outcomes of which are expected in the coming weeks. 

Given the government of national unity’s make-up, to pass the budget, the ANC will need to concede to some of the Democratic Alliance’s contentious concerns, which we have learnt include amending the Expropriation Act; decentralising port powers in Cape Town and Richards Bay, including passenger trains; accepting a World Bank regulatory review; conducting a comprehensive spending review to reprioritise R100 billion and reducing South Africa’s debt burden.

The results of the ongoing political negotiations are uncertain but let’s for a moment reflect on the significance of the showdown and its implications for our budget-making institutions, particularly the treasury. The past month’s events have raised several red flags, suggesting that the treasury’s budget-making processes are fractured. 

Its functions and purposes seem to be dictated by heuristic political whim, rather than sound economic principles. A striking example is Minister Godongwana’s post-budget comments, where he claimed to have unilaterally decided to increase VAT tax by 2% after growing tired of the criticism of austerity measures. 

He further noted that treasury director general Duncan Pieterse had repeatedly sought confirmation on the policy choice, indicating some level of reservation. Recently, in parliament, Godongwana tried to patch up the situation by stating that treasury officials believed the VAT increase was a good idea. Of course, the proposed 2% VAT increase sparked significant backlash, ultimately leading to a revised proposal of a 1% increase phased in over two years. 

What’s puzzling is that the treasury’s previous budget reviews had already established an institutional position on VAT, concluding that the 2018 increase of 1% had not yielded the desired outcomes. So, what changed? What new evidence emerged to contradict their previous stance on VAT? 

Considering the implications, we must ask to what extent our democracy can tolerate political leaders influencing budget institutions with decisions based on personal biases and ideology, rather than evidence-based reasoning. Furthermore, should we strengthen the treasury’s institutional framework, ensuring that impartial civil servants provide objective analysis of the proposals put forth by political heads? 

The prevailing circumstances also suggest that the treasury’s institutions are vulnerable to evidence and forecasting that lacks scientific rigour. Without a rigorous approach, the budget proposal falls short of a concrete fiscal strategy. 

The medium-term fiscal strategy forecasts a meagre 1.9% growth rate for 2025, significantly lower than the 3% target announced in President Cyril Ramaphosa’s State of the Nation address in February, and lagging global, emerging market and sub-Saharan growth projections. Furthermore, the treasury has a history of revising its forecasts downward having, in 2023, overestimated economic growth in 9 out of the preceding 12 years. 

Forecasting is a core component of budget proposals, yet the treasury’s track record is marred by consistently poor predictions. This raises critical questions — are these inaccuracies a result of rigorous scientific re-evaluation or a consequence of consistent political pressure to artificially inflate forecasts, disregarding empirical evidence? Regardless, the treasury’s volatility is alarming and simply unacceptable. 

A fundamental tenet of our social contract is that civil servants serve the greater good, prioritising the interests of the state above all else. From an institutional perspective, it’s crucial that skilled and well-trained professionals at the treasury are protected to serve South Africa with impartiality and rigorous evidence-based analysis. 

In the aftermath of the budget saga, it is imperative that we prioritise this critical issue in our forthcoming discussions. 

Siseko Maposa is the director of Surgetower Associates management consultancy. He is a regular commentator of political economy.