Fractious Gnu Faces Second Budget Speech Reckoning

"Investors are at this stage very focused on the durability and efficacy of the government of national unity," said Elna Moolman, head of South Africa macroeconomic research at Standard Bank Group. "They'd view any further disruptions to the budget process as an indication that the GNU isn't working very well, which would reduce their expectations in terms of growth and fiscal reforms."

Godongwana and his national treasury officials were sent back to the drawing board last month after his revenue and spending plan failed to get buy-in from parties including the Democratic Alliance, the second biggest group in the GNU. That led to the budget being postponed for the first time in at least three decades.

South Africa's bond yield curve has steepened since the delay, as long-term yields rose on concern about the outlook for government borrowing.

The sticking point was a proposed two percentage point increase in the VAT rate to 17. Negotiations since then have been focused on getting the coalition to agree to a compromise formulation.

The coalition took power last year after the ANC lost its outright majority for the first time since apartheid ended in 1994. Its formation has made the budgeting process more complicated, because there is a need for cross-party consultation instead of the ANC taking decisions on its own.