The DA agreed to a temporary, three-year 0.5 percentage point increase in VAT for the revised budget on condition a unit in the office of the president would be established to oversee a comprehensive spending review, as part of its “pro-growth” budget proposals.
The unit, which would be co-chaired by the two deputy ministers of finance, David Masondo and Ashor Sarupen, would be tasked with identifying R100bn worth of savings across national and provincial governments and include an audit of ghost employees within the state departments from May 1, according to the DA.
The proposals, which were sent to President Cyril Ramaphosa and finance minister Enoch Godongwana in the lead-up to the tabled budget on Wednesday, however, did not include amendments to the National Health Insurance (NHI) Act and Bela Act.
Godongwana and the minister in the presidency, Khumbudzo Ntshavheni, previously said the DA had sought to use the two sets of legislation to swing the outcomes of the budget negotiations in the party’s favour. That allegation was repeated by ANC secretary-general Fikile Mbalula on Thursday during a post-budget media briefing.
The revised budget is not cast in stone and will undergo a parliamentary process before it is passed. The ANC would require the support of either the DA, EFF or MK party, which constitute the majority of seats in the house, for it to pass in the National Assembly.
“I was the person doing the informal and formal discussions. I can assure you that NHI and Bela were never raised. Why would we raise Bela when [basic education] minister [Siviwe] Gwarube is doing the regulations and the NHI matter has been dealt with during the MTDP [Medium-Term Development Plan],” DA leader John Steenhuisen told Business Day.
The list of proposals, which Business Day has seen, however does include demands to amend the Expropriation Act “to align processes and sequence, to allow the appropriate court to approve compensation before property is taken away from anyone, and replace references to nil compensation with the constitutional formulation ‘just and equitable compensation’”.
The DA wanted a written agreement on governance, terms of reference and criteria to be signed to the spending review before the Division of Revenue Bill was presented to parliament as part of “confidence building measures” of the coalition government. That would be accompanied by a joint announcement of the agreements reached by Steenhuisen and Ramaphosa, according to the DA proposals.
The DA had initially opposed any increase in VAT or other taxes including the initial two percentage point increase. The party’s opposition to the increase led to the delay in the tabling of the budget in February.
The DA, however, concedes in its list of demands that the 0.5 percentage point VAT hike, presented in Godongwana’s budget on Wednesday, could be used to finance “critical programmes in 2025/26.”
The Treasury opted for a half a percentage point hike in each of the next two years, with the proposed increases set to generate R13.5bn in revenue in 2025/26, R30bn in 2026/27 and R32bn in 2027/28.
This differs from the DA proposals, which would see a reduction in taxes from low-income workers from 2026/27. The decrease in taxes would be accompanied by the spending review and reprioritisations from next year.
The DA proposed that “30% of the proceeds of the spending reprioritisation go towards reducing SA’s debt burden, 20% of the proceeds to go towards reducing personal income tax for the bottom income and 50% of the proceeds to go towards infrastructure spending”.
The three-week budget impasse is another pressure for the 10-member government of national unity (GNU) and has further highlighted its deep ideological differences as the various parties seek to prioritise their respective constituencies and policies.
“It is critically important that all parties stick to the agreement that is made in order to ensure coherent, responsible government. It is also necessary for the public to see that a compromise has been reached in which both parties conceded something, and both gained something,” the DA document reads.
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