Cape Town – The Government of National Unity (GNU) is teetering on the edge of collapse as the Democratic Alliance (DA) digs in its heels, demanding a signed agreement with the African National Congress (ANC) on economic reforms that would give the DA shared control over the nation's economic agenda. The DA has made its support for the crucial national Budget conditional on such an agreement, setting the stage for a high-stakes showdown that could reshape South African politics.
The drama unfolded as President Cyril Ramaphosa was expected to call DA leader John Steenhuisen on Tuesday, just hours before Parliament's joint finance committees were scheduled to meet. The urgency of the situation was underscored by Steenhuisen's early morning tweet: "Last night, the ANC refused to finalise an agreement on growth and spending reforms, imperilling the GNU. The DA will oppose the Budget unless a written agreement is reached."
The DA's stance marks a significant escalation in tensions within the GNU, which was formed following the recent election. The party has been pushing for substantial economic reforms, arguing that they are necessary to stimulate growth and create jobs. However, the ANC has been reluctant to cede control over key economic decisions, leading to a deadlock that now threatens the stability of the coalition government.
At the heart of the dispute is a lengthy document compiled by the DA, outlining its conditions for supporting the Budget. The party indicated it would agree to a 0.5-percentage-point (ppt) increase in VAT in 2025/26, provided the ANC made concessions on a list of items, including the controversial Expropriation Act and the National Health Insurance (NHI) scheme.
Furthermore, the DA has demanded "shared control in the management of the economy," proposing that Deputy Finance Minister Ashor Sarupen be appointed joint chairperson of Operation Vulindlela—the Presidency and the Treasury's project management unit—alongside Deputy Finance Minister David Masondo.
Since that breakdown, the two parties have engaged in several high-level discussions at the level of the Presidency. Notably, the Treasury and Finance Minister Enoch Godongwana have not been directly involved in these political negotiations. A parallel process has also been underway in Parliament, where the ANC chief whip and caucus have engaged with all parties ahead of Tuesday's crucial meetings.
In addition to the policy disagreements, the DA is also pushing for the removal of a second 0.5ppt VAT increase, which is currently pencilled in for 2026/27 in the fiscal framework. The party argues that the R15 billion that would be raised through this second VAT increase should instead be generated by rationalising costs and finding savings within the existing expenditure framework.
The DA's uncompromising stance has put the ANC in a difficult position. With the DA holding the balance of power in Parliament, the ANC needs its support to pass the Budget without relying on smaller parties. However, ceding too much control over economic policy could alienate elements within the ANC and undermine its own agenda.
The ANC's refusal to accept some of the DA's budget proposals has forced the party to shop around for votes from smaller parties in recent days as a back-up plan. This strategy, however, risks further straining the GNU and could ultimately lead to its collapse.
The DA held a press briefing on the Budget at 08:30 on Tuesday, where Steenhuisen revealed the outcome of the negotiations and its implications for the budget and the GNU. The ANC followed with a briefing at 09:00, outlining the outcomes of its National Executive Committee meeting held over the weekend.
Even if a deal is reached at the eleventh hour, it remains uncertain whether all the necessary procedures can be completed in time for Wednesday's crucial vote on the fiscal framework in the National Assembly.
The joint finance committees are scheduled to meet at 09:00 to consider their report on the fiscal framework, following several days of public hearings in which stakeholders and individuals provided input and recommendations. Members of the committees have the right to table amendments for discussion.
If the committees decide to amend the fiscal framework, Godongwana must be given 48 hours to respond. This would necessitate rescheduling Wednesday's vote, potentially pushing it back to next week. While legislation allows for the fiscal framework to be adopted within 16 days of being tabled, or "as soon as reasonably possible," any delay would add further uncertainty to the already fraught situation.
It is also unclear whether an amendment to the fiscal framework will be strictly necessary. The framework that must be adopted relates only to the financial year 2025/26, although the report includes indicative numbers for the outer years. As the DA's primary concern is the VAT increase scheduled for 2026/27, it is possible that the committee could adopt the fiscal framework for 2025/26 and agree to revisit the VAT issue in Budget 2026/27.
However, it remains to be seen whether the DA would accept such a compromise, or whether it would insist on changing the indicative numbers for 2026/27, which would necessitate a formal amendment.
The coming days will be critical in determining the fate of the GNU and the future direction of South Africa's economic policy. As Steenhuisen himself acknowledged, the stakes are high, and the outcome of these negotiations will have far-reaching consequences for the country.
The DA has been driving a hard bargain to get its economic reform proposals included in the budget framework instead of a VAT increase. It remains to be seen whether the ANC will ultimately concede to the DA's demands, or whether the GNU will fracture under the strain of these deep-seated disagreements.
Either way, this year’s votes on the Treasury’s money bills could come down to the wire. On Tuesday, the finance committee will finalise its report on the fiscal framework and revenue proposals in preparation for it to be tabled and voted on in the National Assembly on Wednesday. Although not a bill, the framework establishes economic policy and revenue projections and sets the limit for government spending.
