It has been an uncomfortable three months for the National Treasury and finance minister Enoch Godongwana in particular.
On Sunday, the Western Cape High Court handed down a court order suspending the 50 basis point VAT hike for this year and the next, after an out-of-court settlement between Godongwana, the DA and EFF.
The court ordered Godongwana to pay 50% of the DA and EFF’s legal costs and ordered Speaker of the National Assembly Thoko Didiza to pay the other half of the costs borne by the two parties.
The “VAT impasse” was a first in many respects — the first budget to be passed by SA’s first coalition government, by vote, at a national level post 1994. It was the first time the ANC has had to seek outside support for its budget. It was the first that had to pass through a cabinet with representation from at least six different parties.
The ill-fated increase was only the second VAT hike in the democratic era. Crucially, it was the first time the grip of the finance minister and the Treasury over the budget was scuppered.
In the recent past, attacks on the Treasury were for nefarious reasons. Former president Jacob Zuma’s Russian nuclear deal day dreams, for instance. During his second term in office, he and his allies tried desperately to weaken the Treasury, to “bring it to heel” because it was a bulwark against his state capture project.
Zuma and his allies launched a far-reaching attack on the Treasury, which included a fake intelligence report, dubbed “Project Spider Web” deliberately smearing officials in the Treasury.
The most audacious attempt to bring the Treasury to heel was Zuma’s “weekend special” finance minister Des Van Rooyen, who spent just four days at the helm of the crucial department accompanied by “advisers” linked to his friends, the Guptas.
In many ways, the state capture days were simpler — there was a clear line between who was in the wrong and who was right. Godongwana’s VAT hike did not come from an evil or nefarious place.
The economy is limping from one year to the next and the cost of social services are increasing annually. He was seeking to close the hole in state coffers in the least-damaging way possible, which many economists still argue remains a VAT increase.
The EFF is calling for Godongwana’s head after his withdrawal of the VAT hike and his concession in court which led to the court order. There is also a sense that there are some within his own party, the ANC, who feel he should take the fall over the impasse which is likely set to result in a budget 3.0 being tabled in parliament in the coming weeks.
A new finance minister entering the space would only result in further delays as a new candidate familiarises him or herself with the impecunious state of government finances.
However, this is short-sighted — crucially, Godongwana is among the ANC politicians in the “departure lounge”. He is unlikely to return to the cabinet post 2029, if he makes it to the next general election as finance minister. He is aligned closely to President Cyril Ramaphosa and is likely to depart too, should the president opt for an early exit after the ANC’s next elective conference in 2027.
Godongwana has already made it clear that despite VAT being off the table, there remains a R75bn gap between revenue and spending in the medium-term budget, which has to be plugged. A new finance minister entering the space would only result in further delays as a new candidate familiarises him or herself with the impecunious state of government finances.
The VAT impasse should not be turned into a witch hunt and in a way it should be celebrated.
There has never been so much interest in a budget process by so many ordinary South Africans. There has never been as close attention paid to the budget by parties in parliament as there was this time around, with Zuma’s MK party as the notable exception — he has never been particularly strong on numbers.
There has never been such backbiting, but also vibrant, idea-driven discussions between parties in parliament over the budget and the ANC has never felt the heat to compromise as it has during this process.
The VAT impasse is about more than Godongwana and the Treasury.
It is about the democratic process and about how it is finally working as our constitution envisages.
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