A one-year VAT hike, which could be removed if there are significant savings registered in a comprehensive spending review, is part of a potential deal between the ANC and the DA.
Budget negotiations have progressed significantly in the last 48 hours — the ball is now firmly in the ANC’s court after the DA sent final amendments to the proposals for a deal on Sunday.
A deal is close, and should the ANC and DA pull it off, the two anchor parties in the government of national unity (GNU) would pass the toughest test faced since the formation of the coalition government last year, providing much-needed political stability, the basis for investment and economic growth.
Business Day understands that aside from economic growth proposals the deal includes a VAT increase in the first year and not the second. Finance minister Enoch Godongwana tabled a 0.5% VAT hike for each of the next two years in his March 12 budget.
If significant savings are registered in the first year, the VAT hike could be reversed completely, sources close to the talks have told Business Day.
In exchange for the DA’s support on the budget in the first year, a host of “very key economic issues and sharing in the development of economic direction and policy for the government” are included in the potential deal.
The talks began shortly after the budget was tabled by 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.
However, on Friday, there was a strong sense that the ANC would ditch the DA in favour of the EFF, after the presidency informed the DA negotiators 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 on Monday.
The ANC presented a new document to the DA, on which the DA gave input and returned on Sunday. The two parties are set to hold further talks on Monday as crunch time looms ahead of Wednesday’s scheduled vote on the budget framework in Parliament.
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