President Cyril Ramaphosa’s administration has a mountain to climb if the Treasury’s proposed VAT increase is to be scrapped by May 1.
The ANC’s top brass will meet on Monday after political consultations with the DA, EFF and MK Party at the weekend, which found that there is “zero” support for a VAT hike, insiders in all political parties independently confirmed to Business Day on Sunday.
“I have no idea, as minister of finance,” Enoch Godongwana said on Sunday about the outcome of the meeting.
Godongwana has already cut an initial proposed VAT hike of two percentage points down to half a percentage point in 2025 and another potential half a percentage point in the next financial year.
This came about after protests from government of national unity (GNU) partners and other opposition parties before he tabled the fiscal framework in early March.
For the VAT increase to be scrapped altogether there is little legislative precedent, as the GNU is going through its “first budgetary process”. A VAT increase can, however, be overturned by the courts and the DA’s challenge to Godongwana’s proposed fiscal frame is set to be heard on April 22.
The finance minister can also withdraw the proposed VAT hike by introducing an amendment to the fiscal framework, but that would need to be processed and assented to by Ramaphosa before May 1. The challenge, though, is that parliament is now in recess.
Godongwana’s decision to fund the budget shortfall with VAT hikes has raised the prospect of the budget failing to stand up to parliamentary and public scrutiny, a reflection of an altered political landscape due to the ANC’s loss of its electoral majority in the 2024 general elections.
On Sunday, ANC first deputy secretary-general Nomvula Mokonyane confirmed that the way forward would be discussed at Monday’s meeting of the party’s top seven officials.
SA must come first. As leaders, we owe it to the people of this country — black and white, young and old — to rise above narrow political interests and work together in the spirit of unity and shared progress.
DA federal council chair Helen Zille added on Sunday that tensions in the GNU could be more easily resolved if the “ANC just plays by the rules and comes to meetings that are arranged”.
Both parties released statements at the weekend that they had frank, honest and constructive engagements on the way forward in the GNU.
“SA must come first. As leaders, we owe it to the people of this country — black and white, young and old — to rise above narrow political interests and work together in the spirit of unity and shared progress,” the ANC statement said.
“The ANC will continue to engage all GNU partners, civil society and other stakeholders in pursuit of a stable, inclusive and effective government that places the interests of South Africans at the heart of all its decisions.”
The DA said: “The engagement took place in a constructive atmosphere, with both sides speaking respectfully yet frankly about the need to resolve the impasse over the budget and to enhance co-operation between the two parties in the context of the GNU.”
The party reiterated its position that “a VAT increase is unaffordable in the absence of meaningful reform that will increase economic growth and create jobs”.
The DA also said it was committed to finding solutions that were in the best interests of the people of SA — both in relation to the budget and to strengthen the GNU.
Lawson Naidoo, executive secretary of the Council for the Advancement of the SA Constitution, said if Godongwana wanted to resolve the budget impasse around a half-percentage point VAT increase, it could happen before May 1.
“The issue of the budget should not be a major stumbling block. It is about the art of the political deal at this stage. Godongwana can withdraw the VAT proposal and replace it with an alternative bill that excludes the VAT hike with an amendment to the fiscal framework,” Naidoo said.
He said overturning the fiscal framework should be easy, but passing new legislation may be more difficult because of public consultations.
“The reality, though, is that this needs to be fixed urgently and we have to ride this wave out and learn the hard lessons.”
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