South Africa doesn’t have a budget

Business leaders have warned that South Africa cannot get complacent thinking that the tabled budget on Wednesday (12 March) is a done deal, saying that it has not been passed, and great uncertainty lies ahead.

This comes as the Government of National Unity (GNU) faltered in its negotiations around the finances—most notably the Democratic Alliance’s (DA’s) insistence on no tax hikes.

What the country has is a proposal, and is in unprecedented territory trying to get it approved.

Finance minister Enoch Godongwana said he’ll enlist support from a range of political parties to get his revamped budget approved if the second-largest member of the nation’s ruling coalition follows through on a threat to reject it.

The National Treasury on Wednesday proposed raising the value-added tax rate incrementally to 16% by mid-2026, from 15% currently.

That was half the increase it suggested three weeks ago, but was still shot down by the DA, which opposes tax hikes and wants more to be done to fire up the economy.

If the DA does vote against the budget, “we may have to mobilize other political parties and probably make concessions” to them on condition that their demands are budget-related, Enoch Godongwana said in an interview on Wednesday.

“It’s an untenable situation where you have people working as an opposition in cabinet.”

The GNU was set up last year after May elections in which the African National Congress lost its parliamentary majority for the first time since it took power three decades ago.

While it comprises 10 parties, the ones that count are the ANC, which won 40% of the vote, and the DA, which got 22%.

The two rivals have previously sparred over the ANC’S plans to introduce a national health-insurance plan, change language and admission policy at schools, and promote a new land-expropriation law.

President Cyril Ramaphosa’s administration has remained intact despite their differences.

DA leader John Steenhuisen said the ANC still hasn’t accepted the election outcome or come to terms with having to share power, and the ruling alliance had reached a critical juncture.

“Why do you come to parliament to pass a budget without a majority?” he said in an interview in Cape Town.

“We have been very clear from the beginning that we had an election promise not to raise taxes and we were willing to compromise” if measures were introduced to encourage economic growth — which didn’t happen, he said.

The possibility that parliament may fail to pass the budget and the risk that poses to the unity of the coalition weighed on the financial markets on Wednesday, with the rand losing as much as 1.3% against the dollar and the FTSE-JSE Africa All Share Index erasing gains.

“A divided GNU means it will be difficult to achieve the required simple majority to pass the budget bills” and amendments are certain to be proposed when they are referred to parliament’s finance committee, said Jee-A van der Linde, a senior economist at Oxford Economics.

The matter will come to a head in May, when lawmakers will decide whether to pass the revenue and expenditure plan following debates on the allocations to government departments and entities.

The situation “throws us into a whole new, unprecedented set of circumstances” and its unclear how parliamentary committees will handle the process, Daniel Mminele, chairman of Nedbank Group Ltd., told NewzRoom Afrika.

“We should take comfort that the minister tabled the budget documents today, which allows the process to continue, negotiations to progress. But we can’t complacent about us having a budget. We don’t have a budget.”

Godongwana said the DA must determine whether it wants to remain in the government, and that he’s confident the budget will get majority backing in its current form.

The source of his optimism was unclear, given that the uMkhonto weSizwe Party and the Economic Freedom Fighters, respectively the third- and fourth- largest parties in parliament, also rejected the tax increases.

Lobby group Business Leadership South Africa described the lack of consensus on the budget as “disturbing.”

“The fiasco of last month’s delayed budget and today’s tabled budget which may be rejected in parliament is likely to be repeated unless the government faces some harsh realities,” the group said in a statement.

“Things cannot simply continue to be done in the same ways, because that will lead to the same outcomes.”

(Additional reporting by BusinessTech)