There will be a solution to the great budget impasse and life will continue, but it will not be business as usual for the ANC. Nothing can reverse the political fallout for the party over its inability to control the 2025 budget process, which in turn exposed the stark reality of its 40% share of the seats in parliament. That electoral weakness is, in turn, linked to ANC governments’ inability over many years to grow the economy and create jobs.
Tax increases, fiddling with pension contributions, cutting spending, further borrowing — we have yet to see how finance minister Enoch Godongwana will slash, pull, nip and tuck when he tables a refreshed budget on March 12.
The revision follows the dramatic and unprecedented postponement of the tabling of the 2025 budget by Godongwana last week, after a last-minute cabinet meeting — a crucial meeting, obviously, but one that President Cyril Ramaphosa did not attend.
Ramaphosa’s spokesperson, Vincent Magwenya, said that ahead of take-off from Pretoria to Cape Town on Wednesday February 19, the captain piloting Inkwazi, the presidential aircraft, informed the presidency about a crack in the windscreen. The flight had to be cancelled, and Ramaphosa rushed to OR Tambo airport for a commercial flight at 11.40am, culminating in Deputy President Paul Mashatile chairing the cabinet meeting.
This left Godongwana without crucial political cover as he faced off against his cabinet colleagues over the proposed addition of two percentage points in VAT. What is not clear is Ramaphosa’s personal view of the proposed VAT increase, if he has a view.
Politically, one thing is clear: the ANC is in deep trouble. It could take its GNU partners down with it, if the DA and others cannot help bring about deep reform. The country needs an increase in the ratio of investment to GDP from 15% to at least 25%, to stimulate economic growth in line with South Africa’s emerging-market peers — and it must get people into jobs.
Polling released by the Social Research Foundation (SRF) this week indicates that the ANC’s support has declined further since the May 2024 general election, when it lost its outright majority nationally for the first time.
SRF director Frans Cronje tells the FM that the latest research threw up a new trend — one he has not seen before in his many years of polling. “A third of the ANC’s voter base has fallen away. Unless there is a material shift in the performance of the country, I don’t see how they can recover. I have never seen this before.”
The SRF poll has the ANC on a record low of 32%, but the categories in which voters fall is the most interesting aspect. “These are not your typical undecided [voters],” says Cronje. “These are people who voted for the ANC in the past but are now free agents. They are people who have been watching for years, they really want to vote for the ANC, but feel so let down.”
This is unsurprising, given the ANC’s performance since Ramaphosa took over after the dramatic resignation of his predecessor, Jacob Zuma, in 2018.
“We have become parochial and we look at what will advance our own personal self-interest," Ramaphosa said at the ANC’s Northern Cape conference in 2017, in an address which marked the launch of his campaign for the party presidency.
“We don’t want leaders who are arrogant, we don’t want leaders who think they know it all, we don’t want leaders who leave our people behind.”
This was Ramaphosa’s first promise — to ditch the arrogance and start listening, to end corruption. His second promise was to end state capture and deal with corruption. When he became president of the country and ahead of the 2019 election, his pledge was to clean up state institutions, end load-shedding, grow the economy and create jobs.
Ramaphosa has held five investment conferences, with much fanfare and pledges of R1.14-trillion in investment. Yet the investment-to-GDP ratio remains stubborn at 15%, says Cronje.
“It was all smoke, mirrors, nonsense … all public relations, pantomime stuff. What really baffles me is that it would be easy for the ANC to come back from this, get growth going, create real jobs. That would draw those voters back in, but the party keeps driving them away. All that this 11% of lost voters want is an economy with a little life in it.”
After all, the ANC has done it before. It pulled off an impressive economic feat in the early democratic era — reducing debt and rolling out an extensive social welfare programme, while widening access to key services including electricity, health and education. In the early 2000s it even produced a budget surplus.
Cronje says there does not seem to be any party in South Africa’s political spectrum pushing policies that will stimulate investment quickly. While the DA is doing a good job in the GNU, he says, he does not believe it has a formula to take the growth rate up to 5%. He warns that South Africa could be heading for a dangerous “leaderless” revolution.
“Our problem is we tax capital on entry into the country, making us hugely uncompetitive. When we try to address this, we get into a destructive fight about empowerment policies — policies that I agree we need. But if the ANC loses power, how will it achieve empowerment? If the ANC was achieving genuine empowerment, it would be sitting on 60% of the vote right now.”
The crisis over the budget last week also produced a moment for the ANC’s GNU partners to show that they are not simply a set of mascots. However, there was a lot of political hot air as they scrambled to claim credit for the veto. While party leaders, including from the ANC, have pointed a finger at Godongwana, he had warned as early as April last year that the February budget this year could include substantial adjustments — potential tax hikes, spending cuts or a combination of both.
You cannot form a coalition government and not take absolutely seriously the inputs of your coalition partners
— Prof. Susan Booysen
“If you want to do a fiscal consolidation, you must do it far away from the election — and the timing for us is the budget we will table on February 19 2025,” Godongwana told Reuters a month before the 2024 election.
Last week, the DA was first to launch a public relations volley after Godongwana had to abandon tabling the budget. But the ANC waded in too, seeking to extract political mileage from revealing that its own ministers in the cabinet also opposed the move. Yet this was after the ANC’s top seven leaders had accepted Godongwana’s budget two days earlier.
National Treasury insiders tell the FM there had been informal consultations with the DA, trade union federation Cosatu and the ANC on the budget. Cosatu’s parliamentary co-ordinator, Matthew Parks, said the federation had alerted key ministers to the VAT hike and warned that it would be too “politically toxic to sell to the electorate”. Minister of correctional services Pieter Groenewald, of the FF Plus, warned that going ahead with the hike would lead to riots.
Political analyst Prof Susan Booysen was shocked that the budget, which is actually a crucial set of bills tabled in parliament that have to be voted in to keep the country running, was not canvassed among GNU partners months in advance. But Godongwana told journalists this was the usual practice with “market-sensitive” information.
“I was shocked that the ANC had not embraced this coalition way of doing things,” Booysen tells the FM. “You cannot form a coalition government and not take absolutely seriously the inputs of your coalition partners, because too many coalitions stand or fall by budget disagreements.”
The political ramifications of meekly agreeing to what would likely have been an unpopular tax increase could have meant political suicide for the parties within the GNU.
This was after the ANC pushed forward with legislation passed through parliament in the sixth administration, but signed into law by Ramaphosa under the GNU, without alerting coalition partners about the move. As a result, the Expropriation Act has been challenged by the DA in court. The Basic Education Laws Amendment Act and the National Health Insurance Act will likely stall in implementation, due to the continued constraints on the fiscus.
A lack of consultation and input on something as crucial as the budget was an arrogant misreading of reality and an embarrassing step too far. A typical ANC script is that when “consultation” happens, it implies the party has listened but does not have to do anything about it.
“Those days are over,” says Booysen. “Even if the ANC could boast, as they’ve done regularly in the past eight or nine months, that this is an ANC-led coalition and its election manifesto is being implemented, it has now hit the budget wall — and budget time is a serious time.”
Budgets of coalition governments have to be intensively workshopped months before they are tabled. Booysen, who is closely studying coalitions at local government level in South Africa, says so far political parties have continued to put their own interests first.
The political ramifications of meekly agreeing to what would likely have been an unpopular tax increase could have meant political suicide for the parties within the GNU. The ANC, for its part, has never rejected a budget tabled by its own minister when it came down to a vote, even though the party did not always agree internally on specifics.
Booysen says successful coalition politics is about building trust, not undermining each other at every opportunity. Any structure set up to consider future budgets has to include these crucial elements. “It should be possible for the 10 GNU parties to converge,” she says. Cronje agrees, saying there are similarities between ANC and DA approaches — and they should be able to find common ground.
The FM understands that future budgets will require a mechanism involving the Treasury and the coalition partners, so that when the budget is tabled, there are sufficient votes to get it passed in parliament.
This mechanism is to be thrashed out between Ramaphosa and Godongwana.
Treasury insiders are adamant, however, that they will meet the necessary 2025 fiscal targets come March 12, even if it is done in a different way.
Godongwana, in a media briefing after the budget postponement last week, also made it clear that in the end, the president has to decide.
“We don’t negotiate the budget. People are going to say whatever they say and we will listen. In the final analysis, there is a president in this country who must make those policy choices. You can’t have deadlock-breaking mechanisms, the president must make a choice and say what is best for the country.”
On Monday, a special cabinet meeting was held on the looming March 12 budget — with Ramaphosa present this time around, perhaps to provide some cover for his embattled finance minister. The budget impasse in the GNU will be resolved, but the ANC’s political dilemma is dire: it has to speed up the pace of reform to grow investment into SA Inc and the economy, or continue to face the consequences.
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