The ANC and the DA were on the brink of signing a historic deal late on Monday to pass the budget through parliament, underlining significant progress to break the impasse in the last 48 hours.
If it comes to pass, a deal between the ANC and DA would mean the two anchor parties in the government of national unity (GNU) would have passed the toughest test faced since the formation of the coalition government last year.
The deal has the potential to reinforce the goodwill that greeted its setting-up in 2024 and provide much-needed political stability for business leaders and investors, who demand nothing less to pump money into the stalling economy.
A senior ANC source told Business Day on Monday afternoon that the talks were “looking positive”, with final details left to be ironed out in the evening.
The ball was in the ANC’s court on Monday after the DA had submitted amendments to a proposal presented in document form by the ANC, which was tabled in talks on Friday.
The document was described as a “good document” by DA sources privy to the talks, and that it could form the basis of an agreement. The DA then sent the document back to the ANC with potential amendments for a final agreement.
“We believe it could lead to a situation where we could put together a deal that could potentially [mean an increase of half a percentage point in] VAT this year only, with the proviso that it would be removed if we were able to identify the savings, and that’s really from the spending review.”
In exchange for supporting the VAT increase, the deal includes a commitment to “sharing in the development of economic direction and policy for the government”.
The talks began shortly after the budget was tabled by finance minister Enoch Godongwana, and a document widely reported on, which includes the DA’s demand for an amendment to the contentious Expropriation Act, is understood to be among the earliest documents circulated between the parties.
On Friday, however, there was a strong sense that the ANC would ditch the DA in favour of the EFF after the presidency informed the DA negotiators that they should simply vote for the budget without anything in exchange.
“It was very disappointing ... but two hours later, the ANC channel reopened and we were told that negotiations were still live,” a DA source said.
DA leader John Steenhuisen is expected to hold a media briefing on the steps of parliament early on Tuesday morning on the outcomes of the negotiations and their implications for the budget, the GNU and the country, according to a media statement from the party.
ANC secretary-general Fikile Mbalula was scheduled to brief the media on the outcomes of a four-day national executive committee meeting, which included discussions on the budget, at 9am.
Parliamentary processes focusing on the budget will also continue on Tuesday.
On Friday, the chair of the standing committee on finance, Joe Maswanganyi, outlined exactly what processes would unfold on Tuesday, stressing that they would not centre on the proposed VAT increase.
In his concluding remarks at a joint meeting of parliament’s two finance committees, at which Godongwana and Treasury officials responded to public submissions on the budget, Maswanganyi stressed that when the committee met on Tuesday to vote on the fiscal framework, it would not be voting for or against the proposed VAT increase or any other tax.
“We are voting for a fiscal framework. A fiscal framework of a budget outlines the government’s overall approach to managing public finances. It includes almost six critical issues: revenue projections, expenditure plans, deficit/surplus goals, debt management, economic assumptions and policy priorities.
“From there, the process proceeds to deal with appropriations and the division of revenue. The appropriations committee will also not be dealing with the increase in VAT, but with the actual allocations of public funds to departments, entities and the three spheres of government.
“When it comes to the issue of VAT, VAT is provided for in the VAT Act. That act provides that if the minister of finance makes an announcement in the national annual budget that the VAT rate is to be altered, that alteration will be effective from the date determined by the minister in that announcement and continues to apply for a period of 12 months from that date subject to parliament passing legislation giving effect to that announcement within that period of 12 months.
“In order for parliament to change VAT, parliament will need to amend the revenue bills after their introduction by the minister of finance and such amendments must be consistent with the approved fiscal framework and the Division of Revenue Bill.
“What it means is that we still have to go through the public participation process on the draft Rates and Monetary Amounts and Amendment of Revenue Laws Amendment Bill and other bills, including the one on VAT.”
Maswanganyi said in 2018, when the VAT rate was raised from 14% to 15%, parliament only considered the issue of taxation in November, long after the fiscal framework, the Appropriations Bill and the Division of Revenue Bill had been adopted.
“I want to make it very clear that on Tuesday we will not be dealing with VAT. We will not be adopting the VAT on Tuesday. If parliament, for instance, wants to change what the minister has tabled or completely wants to reject the proposal on the VAT, that will be done through a law of parliament.
“Parliament will have the power to amend or reject what the minister has tabled. We will do that through the legislative process, which is separate from the fiscal framework, the Appropriation Bill and the Division of Revenue Bill.
“It will not be proper if on Tuesday we tell the public that we have rejected the fiscal framework because of the VAT. We are going to punish the very same public that we represent here in parliament.
“We don’t have to misrepresent issues. It is very important that we clarify what we are dealing with.”
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