PETER BRUCE: Time for Steenhuisen to squeeze seriously hard

It takes a rare degree of chutzpah, just a week away from a budget made more critical by delays over tax proposals, to greet the announcement of truly anaemic 0.6% fourth quarter 2024 GDP growth as “indicative of economic expansion... aligned to our priorities by pursuing a developmental economic framework, tackling the high cost of living in line with our economic transformation agenda.” 

You’ll want to read that again, but trust me, don’t bother. It’s what the ANC said after fourth quarter economic growth figures came out on Wednesday. That’s the ANC for you. Leader of society, deluded and hopelessly incoherent at the same time and all the time. 

You’d think there’d be just a hint of remorse at how remarkably hopeless it is at running the country, but you’d be wrong. The only thing that is going to wake it up is losing even more power.

It is one thing to have been forced into a coalition after last year’s election. It’ll be another if next week’s budget, 20 days after a first attempt failed to make it even out of cabinet, fails in parliament. 

As of now we don’t know how finance minister Enoch Godongwana is going to find the R60bn he had hoped to raise with a 13.3% increase in VAT, from 15% to 17%.

Despite the senior coalition partner in the government of national unity (GNU), the DA, insisting it will not countenance any tax increases in the 2025 budget, stories persist that both Godongwana and his boss, President Cyril Ramaphosa, still have a VAT increase in their mix. 

It’s apparently been half a percentage point, a full point and then back down to 0.75 of a point, with few hints about where the rest of the R60bn might come from even if they get away with a tax increase. For the moment the DA appears to be standing firm. Rumours that the ANC might turn to the EFF for support to get the budget over the line have not stood the test of time (three days).

The World Bank has just sharply criticised BEE as a barrier to fixed investment and economic growth in SA, and the World Bank doesn’t do things like that without some official connivance. 

But another suggestion, that Godongwana might present the budget of his choosing and that the ANC would then take its chances in parliament, and implicitly risk the DA voting against it, is still standing. In a way, if the Treasury is determined not to explicitly introduce budget cuts and to proceed with some degree of tax increase, there is no other way. 

The game now is about pressure and the need to hold the government of national unity (GNU) together. DA leader and agriculture minister John Steenhuisen started 2025 on the back foot after Ramaphosa shovelled legislation past him to both enable land expropriation without compensation and an education bill to make it difficult for Afrikaans-based schools to keep their exclusivity. 

His rebellion over the VAT proposals in Godongwana’s first budget attempt has measurably strengthened him in the party, but it could be fatal to relent now, both to his own prospects as well as the DA’s. He simply has to insist, which in turn is an invitation to Ramaphosa to test his resolve. 

The president has other inducements at his disposal. The DA and voices to the left and right of it are calling for a spending review, something the ANC has done its best to avoid. But the case for a hard look at how and where the state spends its money is powerful. It might start with the vast size of his cabinet — 32 ministers and 38 deputy ministers — but ANC presidents use these jobs as political patronage and Ramaphosa always makes a political call before he acts. 

So while there’ll be no cuts there, the wider state apparatus, including state-owned companies, is ripe for reform and he and Godongwana may try to formulate for Steenhuisen a credible promise for a spending review they can wriggle out of later. Truth be told though, there’s no easy way out here, especially as both Ramaphosa and Steenhuisen are committed, correctly I think, to holding the GNU together. 

Costs first

The DA might consider, in the short space of time available to it, adding more potent demands ahead of the budget. I don’t know how you put a number or a value to better governance, but imagine how much better off we would be, for example, if the law required all legislation brought before parliament to be costed first by the proposing department and, second, by an independent statutory body. 

How is it possible that the newly passed Basic Education Laws Amendment Act introduces an entirely new school grade (grade R) without even trying to estimate its cost? It is one of the things Godongwana is trying now to finance. The ANC thinks money grows on trees. It still hasn’t bothered to cost National Health Insurance. 

And perhaps now would be a good time to wrestle a genuine commitment to electoral reform out of Ramaphosa. Or a reform of BEE, a concept that is coming under pressure despite the ANC’s determination to create a R100bn fund to expand it. The World Bank has just sharply criticised BEE as a barrier to fixed investment and economic growth in SA, and the World Bank doesn’t do things like that without some official connivance. 

So it is becoming harder to label criticism of the efficacy of BEE as back door attempts to reintroduce apartheid or rubbish like that. Perhaps the money intended for the lucky recipients of BEE deals could, for an initial 10 years, be invested in government bonds? Or in state-owned companies? The returns to be paid out in cash. 

Just saying. The thing is, Steenhuisen has policy leverage now like he may never have again. It’s time to squeeze seriously hard. 

• Bruce is a former editor of Business Day and the Financial Mail.