The ANC-DA led Government of National Unity is on a collision course that threatens to tear apart the less than one year old formation as the April 1 deadline to reach an agreement on the 0.5% Value Added Tax (VAT) increase fast approaches.
Image: IOL Graphics
The ANC-DA led Government of National Unity is on a collision course that threatens to tear apart the less than one year old formation as the April 1 deadline to reach an agreement on the 0.5% Value Added Tax (VAT) increase fast approaches.
Finance Minister Enoch Godongwana revealed that the Democratic Alliance (DA) has written a letter to President Cyril Ramaphosa, accepting the 0.5% Value Added Tax (VAT) but only if the ANC scraps the Expropriation Act.
The ANC has so far refused to accede to the DA's demands of having a say on the country's economic agenda.
Political observers say that the ANC was unlikely to bend the knee to the DA's demands to scrap the Expropriation Act which could ultimately lead either party to walk away from GNU and seek new alliances.
This comes in the wake of Finance Minister, Godongwana saying, "The DA has sent a letter to the president accepting the 0.5 % VAT increase in exchange for certain things which are outside the budget, like the Expropriation Act and so forth".
The Finance Minister made the remarks this while addressing the Joint meeting of the Standing Committee on Finance and the Select Committee on Finance on Friday.
“We are more than happy to interact with Parliament and discuss the modalities if there are any changes in the budget, provided those changes are confined to a debate about the budget,” Godongwana added.
“We accept that the Parliament has got the authority to amend the budget, but we would plead that the focus is on how to make this budget efficient.”
The proposed VAT increase has sparked significant backlash from opposition parties, who argue it disproportionately affects low-income households.
The DA told IOL that it was not a secret that they have been negotiating with the ANC over measures to remove obstacles to the creation of economic growth and jobs.
This included creating an enabling environment to move us off the high debt, low growth trajectory, and onto a path to prosperity.
“We have demanded a series of growth-enhancing reforms and a plan to lower taxes over the next three years. That's the only thing that can work to bring relief for tax.
“It is a pity that the finance minister, who made a hack job of the process in the first place, is now trying to negotiate in bad faith through the media when we are doing so in good faith through the channels created for this without being honest about the fact that we called for the reduction of tax in the next three years,” she said.
Responding to this, ANC secretary-general Fikile Mbalula did not agree nor deny that the DA might have sent a letter to the president about the budget.
Mbalula said they have not received anything from the DA about the budget and the talks were ongoing.
“I can confirm that there have been engagements on the question of the budget at the level of parliament between the ANC and political parties that will include the DA and those discussions are continuing,” he said.
Mbalula said they were also comfortable with the 2% VAT increase hence they negotiated for the 0.5%.
This would not be the first time that the DA has sent the letter to Ramaphosa.
The DA previously wrote to Ramaphosa complaining about how the Gauteng Premier Panyaza Lesufi was defying the national orders and denying the DA a chance to co-govern.
IOL News previously reported that the blue party had strongly opposed the VAT increase, saying that it would not support any increase in VAT unless it was temporary.
The DA has also been particularly vocal, framing the hike as a punitive measure that could exacerbate existing economic inequalities.
This has led to tensions within the Government of National Unity (GNU), as the DA has indicated it will not support the VAT increase in the upcoming vote.
The ANC, which leads the GNU, has since sought support from opposition parties outside the GNU to ensure the budget passes, including the controversial 0.5% VAT increase.
However, the MK Party, ActionSA, the Economic Freedom Fighters (EFF), and Build One South Africa (BOSA) have all made it clear that they will not back any VAT hike.
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