The GNU is under serious pressure, which is even more exacerbated by the concomitant pressure from President Trump on South Africa, and the ANC in particular, says the writer.
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Prof Dirk Kotzé
Approval of the annual Budget in any country is comparable to a vote of confidence in the government.
In presidential systems, it is often characterized by negotiations and deal-making between the Executive and Parliament. This year the Budget vote in South Africa became a test for the Government of National Unity (GNU) and the ANC’s control of the finance portfolio.
The main bone of contention was a proposed increase of 2% in the value-added tax (VAT). Only hours before the Finance Minister’s Budget speech, he informed his colleagues in the GNU of the main announcements. The Democratic Alliance indicated that they would not support the VAT increase and therefore the proposed Budget.
Hence, the speech was postponed. In the revised Budget proposal, an increase of 0.5% in VAT in two consecutive years was included. The DA still opposed it and a series of negotiations followed.
While ostensibly a small issue in a much larger budget, it became clear that the ANC miscalculated the public impact of VAT and that quickly it developed a symbolic value of how the parliamentary parties positioned themselves in relation to the budget proposals. The DA, on the other hand, underestimated the extent of the public political response against a VAT increase by parties and trade unions especially on the Left. It was not ready to respond with a comprehensive strategy, except to reaffirm its opposition to it.
Quite soon in the public debates and talks between parties, it was clear that almost all the parties were not in favour of a 0.5% VAT increase and that it would require amendments to the Treasury’s proposed fiscal structure framework. The DA saw an opportunity in its negotiations with the ANC to link the VAT issue to other economic restructuring issues. These negotiations developed a brinkmanship character and continued until the last moment when it stalled in a stalemate.
The question is why this issue escalated so much and polarized the ANC and DA to the point of threatening the GNU’s existence. At least three answers are possible.
The first is that it became a contest between the two parties of who has the veto power on this matter.
Given the elevated prominence of VAT as a budget issue, the second answer is that it will determine who receives the credit for acting in the public interest and stopping the VAT increase.
The third possibility is that it was about who would win the public opinion contest and would be the most credible party in this situation.
ActionSA later made the following observation in this respect: “All that remains is for South Africans to observe which political parties acted to protect their already strained household income and which parties saw them as collateral damage in political manoeuvring”.
The matter had to be decided in a joint committee of the two houses of Parliament on 1 April. The question before the committee was whether it supported the Finance Minister’s amended fiscal structure proposals which included the 0.5% VAT increase, or agreed on amendments with alternative revenue measures.
ActionSA, supported by the ANC, tabled a motion to accept the Minister’s proposals (and therefore the VAT increase) but to recommend at the same time that the fiscal structure be returned to the Treasury so that the VAT increase can be replaced by alternative revenue sources. The DA opposed it - also on procedural grounds.
This episode in which ActionSA acted as a decoy, reaffirmed the ANC’s support for the VAT increase but at the same time, they also agreed that it should be referred back to the Treasury to remove it from the fiscal structure.
Step 1 was therefore to approve the fiscal structure and step 2 was to change it and bring it in line with the DA’s position. Why? A clear answer is not readily available but the following is a possibility: if an amendment of the fiscal structure was the main resolution, then the DA’s position would have prevailed. If the committee’s main decision was that the structure is endorsed, then the Minister’s (and by implication, the ANC’s) position is affirmed.
The power relationship between the ANC and DA was therefore at stake, given the fact that the DA’s objection a few weeks earlier that postponed the Minister’s Budget speech already undermined the ANC’s dominant position. At the same time, the ANC could use the recommendation in the committee resolution that the fiscal structure be referred back to the Treasury for amendment of the VAT increase, as a decoy against potential public criticism that it supported a VAT increase.
In the parliamentary debate on the next day, the legality of the committee’s procedures became a bone of contention. The divide between the ANC (and ActionSA) and the DA repeated itself and the same arguments were repeated. With a majority of only 12 votes, the committee’s report was accepted.
Interestingly, the divide in the vote was not an ideological one. The majority included most of the GNU parties as well as ActionSA, Rise Mzansi and Build One South Africa of Mmusi Maimane. They were opposed by two GNU members (the DA and Freedom Front Plus), and the EFF, MK party, ATM and ACDP. Three of the four biggest parties therefore opposed it.
When these developments are analysed more closely, the VAT issue developed a larger significance which the DA used to bind the ANC into policy discussions about the GNU. The DA complains regularly that the ANC does not consult the GNU parties and rather acts on its own.
One can summarise it by saying that the DA wants to change its relationship with the ANC and the nature of the GNU from government collaboration to power-sharing between them. It is not only applicable at the national level but also at provincial level in the Gauteng government.
An illustration of how the ANC resists any attempt to accept this is in its statement after the parliamentary approval of the fiscal structure which does not acknowledge either ActionSA’s role in it or the recommendation that the VAT increase must be referred back to the Treasury. “The ANC has always acted in the best interests of the people. The adjustment of VAT by 0.5% was a difficult decision, done transparently and with a firm commitment to cushion the poor … The ANC-led GNU is a caring government that listens and responds to the needs of the people”.
For the first time, the parliamentary participation in the Budget process has been broadened to include much more engagement by the different parties. It is due partly to the ANC’s decline in dominance and the GNU’s more active engagement in executive and public debates. At the same time, the ANC experiences it as a challenge to its status as a party, and the DA is the focus point of its discomfort and frustration.
The GNU is therefore at the moment under serious pressure, which is even more exacerbated by the concomitant pressure from President Trump on South Africa, and the ANC in particular.
* Prof Dirk Kotzé, Department of Political Sciences, Unisa
** The views expressed do not necessarily reflect the views of IOL or Independent Media.