The ANC’s chief whip, Mdumiseni Ntuli has called for an urgent meeting of all party appointments within the executive, as the party begins to devise strategies to manage the fallout from the postponement of the budget on Wednesday.
The caucus meeting is scheduled to be held on Thursday morning in Cape Town, according to sources. This is ahead of the planned engagements with other political parties within the government of national unity (GNU) to resolve the impasse that led to the postponement of the tabling of finance minister Enoch Godongwana’s budget.
Draft documents of the 2025/26 Budget Review show the Treasury was preparing to hike VAT to 17% from 15% to fund a big increase in spending on front-line services. This was rejected by leaders of parties within the GNU, setting the stage the for a political showdown within the coalition government.
“A sustained depreciation in the currency means that inflation is likely to be higher because of imported inflation, and that has an implication for the parts of our budget that are indexed to inflation,” the Treasury’s director-general, Duncun Pieterse, warned on Wednesday regarding the slight rand weakness stemming from the postponement.
“So we of course will be watching the implications of the postponement on both the currency and the bond markets. And to the extent that there are changes that we need to factor in for the next budget that we are going to table to the cabinet, we will do that.”
Following a tense cabinet meeting on Wednesday morning, it was decided the budget would be tabled on March 12. Some ANC ministers opposed the VAT increases; however, the postponement of the budget was a political win for the DA in the GNU.
The party, which is also the second-largest party within the coalition government, opposed the increase in the VAT rate and threatened to vote against it in parliament should Godongwana have tabled it as scheduled.
Business Day previously reported that justice minister Mmamoloko Kubayi and tourism minister Patricia De Lille were part of the cabinet ministers opposing the VAT hikes.
“We will now fight to introduce a new budget that is anchored in growing the economy, rather than increasing taxes or debt,” DA leader John Steenhuisen said shortly after the budget postponement on Wednesday.
Instead of a tax hike, the DA had proposed various interventions to boost growth including implementing a fiscal rule, halting bailouts to state-owned enterprises and conducting a government-wide spending review to identify and eliminate waste.
The proposed VAT rate has made the DA and the ANC-aligned labour federation Cosatu strange bedfellows. Cosatu has also rejected the proposals of a tax increase, saying the government should rather provide a R3bn support to Sars to boost tax compliance from 64% to 67%, thus generating the R60bn needed.
“It is better that government experiences some badly needed humbling and goes back to the drawing board, than to have rushed a budget that not only would have been rejected in parliament, potentially creating a constitutional crisis and unnecessary political theatrics we could do without, but most importantly would have been an unbearable burden upon working-class families who are already heavily in debt, battling to cope with the rising costs of living and whose meagre wages have frequently not kept pace with inflation,” Cosatu’s Matthew Parks said.
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