The 2025-26 budget estimates released in December are just that – estimates. The figures are precariously based on best, worse and base case scenarios for key revenue lines such as mining, Southern African Customs Union (SACU) receipts and other taxes.
These revenue lines and their forecasts have been volatile in the past year and going forward, are difficult to accurately gauge.
According to the estimates, released in December, the 2025-26 financial year is projected to see revenues of P85.4 billion and spending of P96.9 billion, which includes P25.1 billion under the development budget. The forecast deficit is P11.4 billion or minus 3.7% of the expected Gross Domestic Product, a term that roughly relates to the output of the economy.
The forthcoming financial year, which kicks off on April 1, may see mineral revenues rise to P17.2 billion from the P8.7 billion expected in in the current financial year. SACU revenues may slip to P23.3 billion from P26.7 billion this year, while non-mining taxes, Value Added Tax and other revenues and grants are expected to increase.
However, in between the December estimates and the realisation of those revenue estimates which is key to supporting the planned spending, lies a myriad of shifting variables and threats, some of them nearly impossible to plan for.
Besides the prolonged diamond downturn which is responsible for depressing the budget and spiking deficits, the volatility of American trade and foreign policy is introducing greater uncertainty this year. For instance, while the Finance Ministry sweats over the diamond figures, President Donald Trump’s tariff wars and threats are ringing around the world, with his recent attacks on South Africa raising the spectre of tighter SACU revenues.
The risks and threats make forecasts difficult.
“From the estimates, we are saying from April we are expecting the revenue for the financial year will be P85 billion, but that is a forecast,” new Finance permanent secretary, Tshokologo Kganetsano said at a budget pitso recently.
“There’s an expectation that mineral revenues will be P17.2 billion but here is a big catch: that’s an assumption that the diamond market will recover and that we can sell.
“We don’t know if it will happen like that.”
Forecasting is particularly challenging when the revenues are based on sensitive products such as diamonds.
“Diamonds are a luxury and these countries (consumer markets) when their economies fall, they forget diamonds and look at their needs.
“Even when they recover, diamonds are not at the top of their priorities.
“Also, we have lab-growns that are now 25% of the market and even if the market recovers, it will not be to the point that we used to be before.”
Mmegi understands that the Finance Ministry has had a difficult period in the last few months hammering the budget together. Highly placed insiders say work has been going on around the clock and over weekends to finetune forecasts and allocate spending according to the priorities of the new government.
“Several times, the drafts that have been produced have been rejected and sent back by the leadership, which has its own priorities.
“The ever-changing situation around forecasts has not made things easier as well,” an insider told Mmegi.
Part of the challenge appears to have been the fact that the October 31 elections and their largely unexpected result, came right as the budgeting process was heating up. Traditionally, draft budget proposals for the next financial year are produced around October, with the Finance Minister receiving a briefing in mid-November.
With the new government, with its own priorities and election pledges, Finance Ministry technocrats found themselves running to and fro, rearranging spending plans while balancing demands from the ministries, some of them with new mandates as part of the new administration.
Mmegi understands that an additional difficulty is that the entry of the new administration has required a reworking of the National Development Plan (NDP) 12, whose drafts were being finalised around the election.
Since Independence, each budget has been based on the five or six-year NDPs which outline the government’s economic priorities and include a Public Investment Programme detailing the projects to be developed in each NDP, the expected cost and the source of funding.
President Duma Boko’s new government, with its human rights approach to economic development, is under pressure to put its money where its mouth is by showing, through allocation of spending in the NDP and budgets, where its priorities are.
“The upcoming budget will not be supported by an NDP because that current Transitional National Development Plan ends on March 31, but NDP 12 has not been produced for debate and passing in Parliament.
“Rather, the budget will generally follow the TNDP in terms of projects that were outstanding.
“Recurrent spending is generally a fixed affair, although this year there is pressure to restrain spending.
“The new administration is under pressure to demonstrate some of its pledges and policies through actual allocations in the budget,” an insider told Mmegi.
Between the shaky, threat-laden revenue forecasts and the different spending demands, Boko’s administration is encountering a fiscal baptism of fire.
