The budget impasse is an example of a profound leadership failure — nothing new to ordinary South Africans, but tragic nonetheless.
SA is firmly in coalition terrain and a contested budget is a new path being traversed by the National Treasury, the ANC and parliament, yet it is clear that MPs from more than one party did not have a firm grip on the process they were participating in this week.
After Tuesday’s adoption of the fiscal framework in the standing committee on finance, ActionSA declared it had single-handedly defeated Enoch Godongwana’s VAT hike and bracket creep on personal income tax, which increases the tax burden on employees.
Only, that’s not the case; the party voted in the committee and in the National Assembly on Wednesday for the fiscal framework as is. There is a legally nonbinding provision for the Treasury to “find the money elsewhere” within 30 days, but that means nothing. The VAT hike is due to take effect on May 1.
The difficulty for ActionSA is that Godongwana has already conducted this exercise, between the first almost-budget tabling in February and the second tabling of the budget, which went ahead on March 12. The almost-budget in February was abandoned on the day because the cabinet could not agree on the two percentage point VAT hike it contained.
Godongwana went back and reworked the budget, but could not exclude some form of VAT hike due to the precarious position of the country’s finances. In short, SA spends way more than it collects and has borrowed so much that a large portion of revenues are now spent servicing the debt.
Godongwana made it clear any party wanting to drop the half percentage point VAT hike must be clear on the source of revenue to close the gap. The Treasury could not come up with an answer in the run-up to the first or second budget, so where will it magically find a new revenue source now?
Clearly, ActionSA was, and still is, being duped by the ANC, which used it to pass its budget on Wednesday. The ANC needed ActionSA because negotiations between it and the DA were going nowhere.
Overplayed
For its part, the DA overplayed its hand, making demands that crossed the bounds of rationality even after Godongwana had been forced to climb down. It pounced on the VAT issue as a balm to soothe all the losses it has registered inside the GNU thus far, including the battle over National Health Insurance and the Expropriation Act.
The DA sought to extract concessions it should have negotiated before it signed the GNU statement of intent last year, such as having a say in economic policy and a greater role in the implementation of key economic reforms.
ANC insiders say negotiations were tough because the DA kept shifting the goalposts, nit-picking over wording in a draft agreement that went back and forth between party strategists. DA leader John Steenhuisen contributed to the impasse by being unable to make a call on his own as party leader.
For its part, the ANC was filled with its own hot air, selling a VAT hike its own ministers had rejected as if it was a boon to all South Africans, graciously bestowed on them by their rulers. Aside from his hubris, it is clear that President Cyril Ramaphosa has been ushered into the exit lounge of the party. His term as its president ends in 2027, with the national general council set to take place in December this year.
For the first time since the 2024 election and its immediate aftermath, Ramaphosa appears to have lost the authority he commanded less than a year ago. ANC factions are pushing past him, looking towards a future without him in charge.
Ramaphosa is aware of it, leaving the budget negotiations to be headed by his deputy, Paul Mashatile, after Godongwana tabled the second budget on March 12. Mashatile has not taken the DA’s participation in the GNU seriously from the outset. The so-called clearing house dispute resolution mechanism was left to him, and it simply does not work, leaving the GNU with no proper way to iron out internal fights.
The budget impasse never stood a chance at being resolved with Ramaphosa and Steenhuisen overshadowed by players and strategists in their parties who want to see a rupture in the GNU that results in the DA’s exit. That may now come to pass sooner rather than later.
It’s a pity not a single so-called leader in the budget debacle prioritised the country’s interests rather than their own or their party’s ambitions.
• Marrian is Business Day editor at large.
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