The Finance Minister, Enoch Godongwana, may or may not deliver the Budget speech later today. Our politics are in a strange new place. For the past fortnight it has appeared to be touch and go whether or not we will hear from him today or face another cancellation of the big speech, as was the case last month.
It was a masterful stroke by the Democratic Alliance (DA) to oppose the ANC’s proposed rise in VAT from 15 to 17 percent. The other members of the ruling coalition and the Ecoomic Freedom Fighters (EFF) rapidly fell behind the DA as failing to do so would have been seen as an attack on the poor.
After the DA had been powerless to prevent President Cyril Ramaphosa signing some of the most draconian legislation for the promotion of the ANC project, the DA’s fortunes changed in an instant and threw the country into new political territory.
If the Democratic Alliance (DA) sticks to its demand that there are no new taxes, the ANC will have to shop around for sufficient support outside the ruling coalition to get its budget passed. That will be a big test of its ability to manage its new reduced position. If it fails to find support for new taxes or delays the decision, it will face dire consequences as leader of the Government of National Unity (GNU).
Even without overthinking the issue, the ANC should be very scared. The end result could be the ANC losing a budget vote, then losing a vote of confidence, and finding itself facing an early election.
Tight spot
Even if the Budget speech is delivered today, the ANC is in a very tight spot. Next could be a challenge to its foreign policy. The DA and AfriForum sending delegations to Washington shows that the ANC is no longer the only force listened to in this new world.
Having ruled almost unfettered for 30 years, the ANC is unused to dealing with serious challenges to its rule.
Some economists have called for new institutional mechanisms to try and ensure that there is agreement between members of the GNU on the budget to avoid repeated annual uncertainty. The GNU has a dispute resolution mechanism and one way to reduce uncertainty might be for the parties to start negotiating detailed budgets well before the annual delivery in October of the Medium-term Budget Policy Statement.
But procedures and institutions cannot rule out irreconcilable differences. The ANC wants to raise taxes to spend more, and it seems the DA won’t compromise on this, at least so far.
No new taxes would force the ANC into decisions on cuts that it is politically scared of making as it erodes its support. That is dangerous for them with less than a year to go before the municipal elections.
Push blame
The ANC is keen to push the blame for potential cuts onto the DA. Godongwna says the proposed rise in VAT was to finance the Social Relief of Distress Grant over the next two years. The grant was brought in during the Covid epidemic to help ease hardship. Last week the talk from the Minister was for a one percentage point rise in the VAT rate to bring in about R32 billion needed to finance the grant over a year. This is a big distortion of the facts.
The pot of tax revenue can be used for multiple purposes. But the Minister did not say the R32 billion could also help finance the premium that is paid for purchasing from the big tenderpreneurs and helping members of the over-sized Cabinet live the lives to which they are accustomed.
The DA and other parties opposing the VAT rise had best be prepared for an onslaught of ANC blame on them. The retort might be easy and credible – we do not want cuts in grants, but the ANC wastes billions and fails to deliver jobs.
That is all part of our coalition politics and we had best get used to the new heightened uncertainty and tensions over the Budget and much else as our economic growth falters and the international environment deteriorates. Delays and horse trading over the Budget are likely to be the new normal in our politics. While the markets may have been somewhat unnerved by what happened last month, it was hardly catastrophic.
We are not the only country where this happens. In the US, the failure by the US Congress to pass a budget has in the past resulted in an almost complete halt in the work by the Federal Government. It will be a first for South Africa, if a budget delay means the civil service cannot be paid.
Much has been written about the delayed budget speech, but what cannot be over emphasised is that this is a big marker in the ANC’s spiral of decline. It might head the coalition government, but it does not have enough power to even get its budget easily passed.
40-percent party
Its opposition to the VAT increase reminds the ANC that it is a 40-percent party and needs to negotiate the Budget and maybe many other issues within the coalition. It also is a big reminder that we cannot resort to taxation alone and need to cut government’s overblown role in the economy and go for growth.
The budget delay shows the potential for the ANC’s larger project of expropriation without compensation, the National Health Insurance project, the change in language policy at schools under the Basic Education Law Amendment Act, and even racial preferences on procurement to be challenged. Most of its push for the National Democratic Revolution needs to be funded. That could make for some very strange, albeit temporary coalitions.
The radical populist comrade parties, the Economic Freedom Fighters (EFF) and uMkhonto weSizwe (MK) might support much of the ANC project in principle but oppose it on the basis that it does not go far enough. That was the reason the EFF failed to support the Expropriation Act. And MK believes that black economic empowerment has failed small businesses. The greater motivation of these parties is to oppose the ANC on a broad front and, wait, they could ally themselves with the parties outside of the ANC out of opportunism.
The EFF and MK have supported the DA and the ANC other coalition partners in opposing the increase in VAT. That was an easy one as any VAT increase, however much the poor are in theory protected by exemptions to the tax, hurts everyone.
This is uncharted territory, but the opposition to the VAT rise could open the way to the ANC being seriously challenged on a wide range of other issues.
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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