Johannesburg – South Africa's fragile Government of National Unity (GNU) is teetering precariously close to collapse, as a bitter dispute between the African National Congress (ANC) and the Democratic Alliance (DA) over the nation's economic policy threatens to unravel the coalition. The DA's insistence on greater control over economic direction has been met with resistance from the ANC, leading to a tense standoff that could see the GNU dissolved and the country's political landscape dramatically reshaped.
Sources within both the government and the DA have confirmed that the crisis reached a critical point during fraught budget negotiations on Friday afternoon. The DA, it is understood, issued a stark warning to the ANC, stating that it would consider the GNU "effectively ended" if the ruling party sought support for the budget from parties outside of the established coalition. This ultimatum underscores the depth of the divide and the DA's determination to exert its influence on economic policy.
Despite the acrimonious atmosphere, a glimmer of hope emerged late on Saturday afternoon when the ANC reached out to DA leader John Steenhuisen's party, paving the way for continued negotiations on Sunday. This eleventh-hour intervention suggests that both parties recognise the potential consequences of a collapse and are willing to explore avenues for compromise, however narrow they may be.
The ANC, for its part, has publicly reaffirmed its commitment to passing the national budget without compromising its core policy objectives, despite the ongoing deadlock in securing the necessary votes. However, the ruling party has remained conspicuously vague on how it intends to achieve this, fueling speculation about its next move.
The DA, deeply suspicious of the ANC's intentions, believes that the ruling party is engaged in advanced discussions with the Economic Freedom Fighters (EFF) to secure their support for the budget legislation. This suspicion is rooted in the EFF's past pronouncements and the perceived ideological alignment between the two parties on certain economic issues. The budget's first major hurdle is scheduled for this coming Wednesday, when the standing committee on finance in the National Assembly (NA) convenes to approve the fiscal framework.
EFF leader Julius Malema has publicly confirmed that he is open to negotiations on the budget and has even floated the possibility of the EFF joining the GNU. However, he has made it clear that his party would not support any increases to the Value Added Tax (VAT), a key revenue-raising measure proposed by the government. This stance presents a significant obstacle to any potential agreement between the ANC and the EFF.
Sources within the EFF indicate that there is internal pressure on Malema to adopt a more pragmatic approach and accept the ANC's budget proposals, potentially with some modifications. Meanwhile, the uMkhonto weSizwe Party (MKP), led by former president Jacob Zuma, has also expressed its willingness to negotiate with the ANC on passing the budget, but only on the condition that it does not involve working with the DA. This complex web of alliances and rivalries underscores the fluid and unpredictable nature of South African politics.
Insiders reveal that Deputy President Paul Mashatile is playing a key role in the talks with the EFF, seeking to bridge the gap between the two parties and find common ground on the budget. Mashatile's involvement highlights the importance that the ANC places on securing the EFF's support, even if it means risking the collapse of the GNU.
ANC Secretary-General Fikile Mbalula, speaking on the sidelines of a meeting of the party's national executive committee (NEC), confirmed that the ANC "is not closing the door to anyone." This statement, while seemingly innocuous, can be interpreted as a clear signal that the ANC is prepared to engage with all parties, including the EFF, in its quest to pass the budget.
ANC NEC member Parks Tau echoed Mbalula's sentiments, telling the media that discussions on the budget were ongoing and that the party was exploring multiple options. He stressed that the ANC remained engaged with various parties – both formally and informally – to ensure the budget's passage. "We have consistently engaged all parties on the budget and will continue to do so until the final moment before Parliament convenes on Wednesday," Tau stated, underscoring the urgency of the situation.
Despite the palpable tensions within the GNU, Tau maintained that the coalition remained intact as long as parties adhered to the statement of intent governing their participation. "If any party decides otherwise, they will have made their own choice, just as some parties have done before. This would naturally change the dynamics of the GNU, but our outreach efforts include every party represented in Parliament," he said, acknowledging the possibility of a breakup while simultaneously emphasising the ANC's commitment to dialogue.
The DA, however, has issued a stark warning, claiming that the markets would react catastrophically if the ANC were to strike a deal with the EFF. This warning reflects the DA's belief that the EFF's economic policies are reckless and unsustainable, and that any alliance between the ANC and the EFF would undermine investor confidence and damage the country's long-term economic prospects.
Sources familiar with the budget negotiations have revealed that the ANC has indicated to the DA that it would not comply with any of the DA's demands in exchange for budget support. This intransigence on the part of the ANC has further fuelled the DA's frustration and deepened the rift between the two parties.
According to these sources, the ANC does not believe that consensus within the GNU is necessary regarding the country's economic policy. This stance directly contradicts the DA's understanding of the GNU's founding principles and raises serious questions about the ANC's commitment to genuine power-sharing.
Furthermore, the ANC reportedly did not put any counter-proposals on the table during the negotiations, which lasted a mere 10 minutes. This lack of engagement has been interpreted by the DA as a sign of bad faith and a clear indication that the ANC is not serious about finding a mutually acceptable solution.
Finance Minister Enoch Godongwana's budget currently lacks the necessary support to be approved by the NA, as the ANC holds only 39.8% of the seats. This parliamentary arithmetic underscores the ANC's reliance on other parties to pass the budget and highlights the DA's strategic importance within the GNU.
Only the DA (21.8%), the second-largest partner in the GNU, and two parties outside the coalition – former president Jacob Zuma's MKP (14.5%) and Julius Malema's EFF (9.8%) – have enough seats to help the ANC secure the budget's approval. This reality places the DA in a powerful position to influence the budget's content and shape the direction of economic policy.
Godongwana's initial budget speech, scheduled for 19 February, was postponed at the last minute after ANC partners in the GNU made it clear that they would not support the Treasury's proposed two percentage point increase in VAT to 17%. This embarrassing setback forced the government to rethink its budget strategy and underscores the challenges of governing in a coalition environment.
This came after the DA had informed Godongwana for nearly three weeks that it would not support any tax increases in the budget. The DA's unwavering opposition to tax increases reflects its commitment to fiscal conservatism and its belief that tax hikes would stifle economic growth.
He eventually delivered his revised budget speech on 12 March, adjusting the VAT increase to a 50 basis point increase this year, with a further 50 basis point increase next year. This compromise, however, failed to appease the DA, which continues to demand more significant concessions on economic policy.
A day before Godongwana's budget speech, the DA sent a draft agreement to him and President Cyril Ramaphosa, offering to accept a VAT increase of 50 basis points for one year, provided the ANC met certain conditions. These conditions, outlined below, reflect the DA's broader agenda for economic reform and its desire to exert greater influence over government policy.
The DA's demands included:
- Amending the Expropriation Act to ensure that a court has the final say regarding property expropriation.
- Establishing a tender process within a year for the devolution of management of the Cape Town and Richards Bay ports.
- Accepting an offer from the World Bank to conduct a regulatory review of the state.
- Developing and adopting a devolution strategy for passenger trains before the end of this year.
- Establishing a committee to conduct a comprehensive spending review to reprioritise R100 billion in spending by national and provincial governments by the end of this year.
- Implementing a focused reprioritisation of state spending to reduce South Africa's debt burden.
The ANC reportedly reacted negatively to this agreement, accusing the DA of attempting to renegotiate their position within the GNU. This accusation highlights the deep-seated mistrust between the two parties and the challenges of building a genuine partnership in a coalition government.
Subsequently, the DA sent a second document containing proposals "for the way forward." These proposals, even more ambitious than the first, underscore the DA's determination to push for significant economic reforms.
In this second document, the DA outlined additional requirements aimed at accelerating economic growth beyond current projections. These requirements included:
- A public commitment to reduce the tax burden within two years and limit the VAT increase of 50 basis points to one year.
- Appointing the DA's Ashor Sarupen and the ANC's David Masondo, as co-chairs of Operation Vulindlela, an initiative to accelerate structural reforms. The DA claims this offer was previously made by Godongwana.
- The cabinet appointing a ministerial advisory committee on the National Health Insurance (NHI) that includes members of the private health sector to foster investor confidence.
- Withdrawing a recent government gazette notice outlining the constitution of a board for the NHI fund, as it was never discussed during medium-term development plan negotiations.
- The Minister of Communication, the DA's Solly Malatsi, issuing a policy directive advising the application of equity alternatives in the Information and Communication Technology sector to encourage greater foreign investment.
- Eliminating all tariffs on goods not manufactured in South Africa to benefit import businesses.
- Amending the Public Procurement Act to prevent preferential procurement policies from increasing government costs for goods and services.
The DA also proposed the establishment of a committee by Ramaphosa and Steenhuisen to negotiate a "coherent economic growth agenda" outside of government, comprising four members from each party and reporting back within three months. This proposal reflects the DA's belief that a more comprehensive and long-term approach to economic planning is needed.
Furthermore, the DA suggested three steps to build trust and demonstrate the GNU's collaborative potential:
- A joint announcement by Ramaphosa and Steenhuisen endorsing the budget before its presentation to the finance committee.
- Cabinet approval of amendments to the Expropriation Act by 17 April.
- A written agreement on the criteria for the spending review by 17 April.
"These measures are all in the best interests of all South Africans, but especially the unemployed and the poor. All parties to the GNU have already committed to the objectives of growth, jobs, opportunity and equality, and this agreement and the budget on which it is based could give the GNU a great deal of positive impetus into the future,” the DA document stated. This statement reflects the DA's conviction that its proposals would benefit all South Africans, not just its own supporters.
The DA has also bluntly accused the ANC of being unwilling to make meaningful compromises since the GNU's inception. "This is the first reason we are now at an impasse. Had the ANC negotiated on the budget in a meaningful way from the start, we would not now be in a situation where two budgets that lack the support of parliament have been presented within three weeks of each other. The DA is no longer prepared to operate on this basis. Before any agreement can be reached on the budget, or anything else for that matter, the principle of compromise needs to be accepted, because if it is not, it will render the GNU dysfunctional."
The DA emphasised that it is not seeking a "tactical victory" over the ANC but a "strategic partnership" within the GNU. "We accept that the ANC has almost twice as much support as the DA, and so we do not expect a disproportional amount of power, but we do expect our fair share and we are willing to enter a partnership in which both parties work collaboratively to take South Africa forward. The second reason we are at an impasse on the budget is the lack of a credible growth plan to return South Africa to above-projected levels of growth and secure our fiscal position into the future. We are simply not going far enough or fast enough on growth reforms. If we carry on in the same vein, we will fail."
A DA government source lamented: "After almost two weeks with our proposals, they didn't even come back with a single alternative proposal." This lack of response has been interpreted by the DA as a sign of disrespect and a clear indication that the ANC is not taking their concerns seriously.
According to this source, the ANC is either preparing for an agreement with the EFF or bracing itself to govern as a minority government. Both scenarios would have significant implications for the future of South Africa.
"The ANC is now actively seeking to end the GNU. The DA understands the ANC is now seeking a budget deal with the EFF. It is choosing economic destruction with the EFF over a partnership with the DA,” a second source claimed, painting a bleak picture of the ANC's intentions.
"If the ANC passes the budget with the EFF’s help, it will end the GNU and South Africa will be at the mercy of the EFF." This stark warning reflects the DA's deep-seated concerns about the EFF's economic policies and the potential consequences of an alliance between the two parties.
"Those who won't listen must feel," a third DA source, a cabinet member, said of the situation, suggesting a sense of frustration and resignation within the DA ranks.
The budget is a top priority on the agenda of the ANC's NEC, which concludes tomorrow in Boksburg. The outcome of this meeting will likely determine the fate of the GNU and the future direction of South Africa's economic policy.
When questioned on Friday about allegations that the GNU is collapsing, Mbalula denied it. "So we still were where we are in terms of the government of national unity." This denial, however, rings hollow in light of the mounting evidence of a deep and potentially irreparable rift between the ANC and the DA.
"So as to whether or not we will work with the EFF or any other political party going into the future, we have invited the EFF to the GNU right from the inception,” Mbalula said, reiterating the ANC's openness to engaging with all parties.
However, Mbalula acknowledged that the EFF had previously rejected the GNU, citing the DA and FF Plus's participation as the reason for their refusal. "We remain committed (to the GNU)," Mbalula insisted, despite the growing signs of a breakdown.
