By Thebe Mabanga
And thus, the recrimination, managing a fallout, political point scoring and throwing shade began.
From the stairs of the Western Cape High Court to a media briefing in Sandton, and more voices shouting from the sidelines, the blurred lines between who is inside the Government of National Unity and who is out, vanished completely.
And with the dust far from settled, South Africans are left none the wiser as to what happens next.
In a dramatic late announcement on Wednesday, the National Treasury said that Finance Minister Enoch Godongwana would introduce the Rates and Monetary Amounts and the Amendment of Revenue Laws Bill, commonly known as the Rates Bill, which proposed to maintain VAT at 15%.
“The decision to forgo the increase follows extensive consultations with political parties, and careful consideration of the recommendations of the parliamentary committees. By not increasing VAT, estimated revenue will fall short by around R75 billion over the medium term,” Treasury said in a statement.
The announcement is a culmination of the 30-day period that was inserted as a condition to support the Fiscal Framework and Revenue Proposals at the beginning of the month to seek alternatives to the contentious VAT increase. In two months, it had gone from 2 percentage points hike, to 0,5% and now to zero.
The Democratic Alliance sought to claim this as a victory from its court action over the VAT increase, where judgement is yet to be delivered, but may now be rendered moot.
“This is a major victory for the DA and, more importantly, for millions of South Africans. This outcome follows sustained opposition by the DA in Cabinet, Parliament, and, most decisively, the courts,” DA Federal Council chair Helen Zille said from the court’s stairs.
Her claim was roundly rejected by the parties that supported the ANC on 2 April and have been in negotiations ever since. They include the Inkatha Freedom Party, ActionSA, Pan Africanist Congress, Rise Mzansi, Build One South Africa, United Democratic Movement, GOOD Party, Al Jam-ah and the Patriotic Alliance, who were all represented at the top table in Sandton on Thursday.
The ANC sought to couch this climb down in diplomatic terms.
“Faced with a changed parliamentary landscape, the ANC rose to the occasion by leading an unprecedented process of inclusive engagement—both within the Government of National Unity and with opposition parties who demonstrated a sincere commitment to nation building. This moment has ushered in a new chapter in our democratic evolution—one where principled cooperation, not narrow political point-scoring, shapes the national agenda,” said ANC spokesperson Mahlengi Bhengu-Motsiri.
She flatly declared: “It must be stated without ambiguity: the Democratic Alliance did not win in Cabinet, in Parliament, or in the courts. What they seek to brand as a ‘victory’ is in fact the result of ANC-led consultations and consensus-building.”
The IFP welcomed the announcement, but spokesperson Mkhuleko Hlengwa made it clear that the party was opposed to the reversal of any measures that were meant to shield the poor from a VAT increase.
These included relatively generous grant increases, widening the net of tax exempted goods and maintaining the Social Relief Distress Grant.
The PAC noted that “fiscal decisions must be guided by people, not elites” and that economic growth and jobs with a clear focus on the people was what was needed.
ActionSA leader Herman Mashaba took the opportunity to remind everyone that his party was outside of the GNU and offered support on principle and felt “vindicated” over the VAT decision.
He could not resist a swipe at his former party, the DA, which he accused of sponsoring a campaign to suggest he supported a VAT hike.
The common thread among the parties that spoke—most notably the PA, BOSA, Rise and GOOD—was that the DA’s claim that this was their victory was “a lie” and they were “extortionists” who sought to use the budget and the VAT increase to bargain over issues such as the Basic Education Laws Amendment Act and the Expropriation Act. The DA had wanted them withdrawn or watered down.
PA deputy leader Kenny Kunene said “the DA has no moral authority to claim this victory”, while GOOD leader Patricia De Lille said the process has taught parties to “put people first”.
Songezo Zibi, the leader of Rise Mzansi and chair of the Standing Committee on Public Accounts, was more scathing in his attack, accusing the DA of holding the budget process “hostage”.
He criticised the DA’s proposal to break up entities like Transnet and the Passenger Rail Agency of South Africa just so that they could be managed at a provincial level.
Zibi further argued that, although contentious, VAT was a tiny portion of overall spending on the budget and could, therefore, not be a deal breaker.
Mmusi Maimane, leader of BOSA and chair of the Appropriations Committee, argued that although opposed to the hike, they had to look at a package of measures.
The Institute of Economic Justice also joined the chorus of those who did not want to see the pro-poor measures touched in any way.
The SA Communist Party said the reversal marked a significant victory for the working class, achieved through persistent mobilisation, mass action and principled resistance led by progressive formations.
The Congress of SA Trade Unions also welcomed the decision, pointing out that the shortfall was now actually R23 billion and could be mitigated by cutting luxuries, giving the SA Revenue Service more resources to improve collection, and Development Finance Institutions taking over critical infrastructure projects where they could secure a return on investments, such as new university beds.
All this raises the question of what Godongwana can and cannot do.
The only thing agreed to so far is that spending will be revised, which will need to be tabled as the third budget. He has been told not to touch grants and other pro-poor measures.
He cannot tamper with the frontline allocations that are meant to hire teachers, nurses and unemployed doctors and he cannot take away the R11 billion that is meant to entice civil servants over 55 to retire early.
Borrowing may no longer be quite an option as the International Monetary Fund said this week that SA’s debt to GDP ratio would now peak at a higher 88,8% in about three years.
So, what can he do?
First to quietly suffer will be areas such as schooling infrastructure, where outer years allocation of the MTEF will be taken away, as was done to raise the R10 billion bailout for SAA a few years ago.
Next, will be to quietly slash the R1 trillion allocated for infrastructure for the next three years by simply shelving projects and not maintaining existing infrastructure.
Then the downward spiral of logistics bottlenecks and poor roads will continue, growth will suffer and before 2030, we might be faced with an unavoidable prospect of an even bigger VAT hike.
The Economic Freedom Fighters, a party supposedly out the GNU and not party to these negotiations offered better direction. It has described the decision by the “incompetent” Godongwana as a withdrawal of the entire budget.
“We note that the withdrawal of the 2025 Division of Revenue Bill and the Appropriations Bill effectively means that the budget is now withdrawn,” it said in a statement.
Moloto Mothapo in the Speaker’s office in Parliament confirmed to Inside Politics that the minister has indicated the intention to withdraw the bills.
The EFF has called for the release of all correspondence on the matter.
Mothapo confirmed the speaker has communicated the intention to release the correspondence to the programme’s committee and it would be in parliamentary papers soon.
Another thing that is clear is that all of this will not be achieved before the 1 May deadline that was set for the VAT increase, and the tabling of the third budget will be equally contentious.
The only good to come out of all this is the future budget will now be more consultative. That seems worth all the mess and trouble.
INSIDE POLITICS
