Former Finance Minister Nhlanhla Nene has cautioned that the National Treasury faces tough decisions to rein in government spending as it prepares to reintroduce the 2025/26 budget to Parliament next month. He believes the option of borrowing more money is no longer viable, given the country’s mounting debt burden.
Government’s initial plan to raise R58 billion in revenue—via a two-percentage-point hike in value-added tax (VAT)—was rejected by Cabinet just hours before Finance Minister Enoch Godongwana was set to table the budget. Now, Treasury must seek alternative ways to balance soaring costs related to a 5.5% public sector wage increase, extending the social relief of distress (SRD) grant, and funding essential services such as healthcare and education—all while the national debt-to-GDP ratio is projected to climb to 75% this year.
In an interview with News24, Nene underscored the gravity of the situation:
“You can either increase your borrowing, which we’ve almost exhausted in my view, or cut expenditure, which also has its limits. The fact of the matter is, you cannot spend more than you earn. Otherwise, you dig yourself into a bigger hole. You cannot spend your way out of this debt trap.”
Nene served as finance minister from May 2014 to December 2015 under former President Jacob Zuma—before being controversially dismissed—and again in 2018 under President Cyril Ramaphosa, stepping down later that year after revealing meetings with the Gupta family.
He was “taken aback” by Cabinet’s move to postpone the budget to 12 March amid the VAT hike fallout. Still, he acknowledged that, given the nature of a Government of National Unity (GNU), it seemed to be “the only solution.”
Uncharted Waters
The former minister expects future disputes, including debates around the Basic Education Laws Amendment Act and the Expropriation Bill.
“We are in uncharted waters. It’s an environment where members represent different constituencies, each pushing for different outcomes. The key is how we handle these disputes, because they will continue to arise,” he said, adding that the GNU will be tested throughout its lifespan.
The Democratic Alliance (DA) recently released a set of proposals to raise an additional R60 billion in revenue for the upcoming budget, suggesting measures such as slashing government advertising, travel, and catering expenses.
Looking ahead, Nene emphasized that unity among GNU partners—particularly in managing government finances—is essential for a stable and successful administration. While he remains “cautiously optimistic” that they can present a pro-growth budget in March, he says all of South Africa’s hopes rest on a sound financial plan, even if complete consensus is elusive.
