Good news about South Africa’s government of national unity

South Africa’s ruling coalition is unlikely to splinter despite differences between the partners over its first budget, Standard Bank Chief Executive Officer Sim Tshabalala said.

Although the members of the so-called government of national unity are divided over budget policy, the coalition will likely ride out the storm intact.

“The base case is that the GNU in South Africa remains and continues to operate,” Tshabalala said in an interview with Bloomberg TV’s Jennifer Zabasajja. “The evidence in South Africa is that the coalition will subsist.”

Last year’s national election failed to produce an outright winner, forcing the African National Congress — which had held a parliamentary majority for three decades after apartheid ended in 1994 — to seek partners to get it past the 50% threshold needed to form a government.

Lawmakers called off last month’s budget presentation after the partners refused to back Finance Minister Enoch Godongwana of the ANC over plans to increase value-added tax by two percentage points this year.

A new proposal presented on March 12 trimmed the increase to 1 percentage point spread over two years.

Still, the second-biggest party in the coalition, the Democratic Alliance, maintains it won’t support any permanent tax hikes or back the budget in its current form but remains open to further negotiations.

Standard Bank’s Tshabalala said that such disagreements are normal within governments. He cited Germany — where a failure to agree on a budget resulted in the collapse of the coalition government — and the US, where Republicans and Democrats are wrangling over a spending bill to avert a government shutdown on Saturday.

“It’s normal in a country that is democratic for these conflicts to happen,” Tshabalala said, adding that the parties will likely seek a consensus on the budget.

He said the VAT proposal was “creative and careful” because it sought to ensure the government was able to generate much-needed revenue, without subjecting businesses and workers to higher income taxes.

He said the government’s commitment to reducing its debt to 76.2% of gross domestic product over the next year surpassed estimates from ratings companies, showing authorities’ focus on revenue and cost management.

“The big question, of course, is ‘will the budget pass? Will it be supported by the GNU,’” Tshabalala said. “I don’t know. We will see.”