Here be dragons

The ANC and the DA are agonisingly close to agreement on the budget, yet it might not happen. That would place the GNU in its current form at risk.

For the first time in three decades, an ANC finance minister tabled a budget that the party does not have the numbers to pass through parliament on its own. It’s a novel and uncomfortable position for both Enoch Godongwana and President Cyril Ramaphosa.

The DA rejected Godongwana’s reworked budget, despite the reduction in the VAT hike from two percentage points (pp) to 0.5pp in 2025 and another 0.5pp in 2026. In exchange for support for the budget, the DA wants a commitment to far-reaching reforms to boost economic growth.

The ANC and the DA now have about a week to find each other in negotiations, failing which they enter uncharted terrain. The DA and some parliamentary committees have sought legal advice on how to deal with various scenarios.

What if the ANC and the DA fail to strike a deal? The ANC, according to chief whip Mdumiseni Ntuli, will be speaking to a range of other parties, including Jacob Zuma’s MK Party and the EFF. EFF leader Julius Malema told the Sunday Times that he was willing to enter talks with the ANC, with a view to entering the GNU. 

If a deal with the DA proves elusive, the ANC will most likely look to the EFF and a host of smaller parties to push the budget through parliament. Given its aversion to the EFF, the DA would almost certainly reassess its participation in the GNU. Malema is also on record as saying he will not enter the GNU unless the DA and the FF Plus are booted out. That would be devastating for business and investor confidence.

The stakes are high.

DA leader John Steenhuisen says he has no idea how things will unfold but is adamant that the DA will only support the revised VAT hike if there is agreement on quantifiable reforms that will boost growth, investment and jobs.

DA demands include amending the Expropriation Act, mainly due to its impact on investor sentiment. “It’s very important for us for economic growth and jobs. We should be landing planes of investment here, not shutting off the runway with legislation and regulations that strangle economic growth and job creation,” Steenhuisen tells the FM.

Ramaphosa signed the act into law in January. The inclusion of a clause allowing for “nil compensation”, the DA argues, could threaten property rights and needs to be clarified.

Steenhuisen says it is a serious threat to foreign direct investment. “We’re not asking them to scrap it. We’re just saying there needs to be an amendment to that particular clause that brings it in line with the constitution, and then makes the court the final arbiter in a matter of no compensation. If the expropriating authority wants no compensation, well, then they must make the argument for no compensation [in a court].”

ANC insiders tell the FM that as the DA has already taken the Expropriation Act to court, it should await the outcome of that process. For its part, the ANC is unlikely to yield. Says one government source: “If the courts and the negotiations that will take place thereafter suggest that there must be a slight amendment to try to clarify one issue or the other, you amend it. You can’t make it a precondition of a budget.”

Complicating matters is that senior cabinet ministers distorted the DA demands in public. Minister in the presidency Khumbudzo Ntshavheni told a media briefing that the DA was seeking to reverse the Basic Education Laws Amendment (Bela) Act and the National Health Insurance (NHI) Act. 

But Steenhuisen disputes this, saying NHI is being dealt with in the medium-term development plan process, and basic education minister Siviwe Gwarube (DA) is penning the regulations around Bela.

You have to drive the reform agenda now ...  Otherwise, we’re going to be sitting in year four of the GNU still talking about the ports, rail and spending reviews

—  John Steenhuisen

“Why on earth would we bring those into this discussion? We did raise the Expropriation Act and for a very good reason. It’s because it’s intrinsically linked to economic growth.”

The Trump administration, for good measure, has shone a global spotlight on the act, calling it the basis for “land grabs”. 

The DA’s demands in budget negotiations include starting the tender process for commissioning public-private partnerships for the ports of Cape Town and Richards Bay this year. It wants the World Bank to be asked to conduct a full regulatory review of the state; passenger rail services in Cape Town to be devolved to the municipal authorities by December 31; small businesses with a turnover under R100m to be excluded from certain provisions of the Labour Relations Act; and for the Procurement Act to be amended to prioritise value for money.

It is also pushing for a comprehensive spending review by the end of the year, overseen by the two deputy ministers of finance (one of them is the DA’s Ashor Sarupen). It wants to reprioritise spending to reduce government debt.

“We have to make tough economic decisions now,” says Steenhuisen. “You have to drive the reform agenda now, because you’re not going to have time in two to three years to suddenly wake up and then you’re in an election. Otherwise, we’re going to be sitting in year four of the GNU still talking about the ports, rail and spending reviews, still talking about the Public Procurement Act and other pieces of legislation that hold back investment.”

Steenhuisen says this is not about scoring political points but ensuring that the GNU delivers on its promise to grow the economy.

“All these things will have a net positive impact on the economy almost immediately, even from a sentiment perspective. Just making the announcement of putting the deadlines down would be a game-changer. It’s not going to destroy anybody. It’s going to grow the economy, create jobs and reduce poverty. Why on earth would you not want to do these things?”

Ntuli, for his part as ANC chief whip, says the DA and the ANC are not far apart. “And that’s what I want to raise with my counterpart, the chief whip of the DA. So we just have to find each other around what, in their opinion, has to be done in the space of the VAT.”

A positive development is that both parties now agree that there should be constant dialogue and negotiations between them.

However, the ANC has made contact with other parties.

MK and the EFF’s outward declarations that they will not support the budget could change during one-on-one engagements with the ANC. Says Ntuli: “We are talking to them. I understand they have taken that posture publicly, which I suppose is in line with what is expected by their own constituencies. But in a boardroom discussion, usually the situation changes because you now deal with the actual reality, not the reality as it may be existing in your head.”

The first vote on the budget will take place on April 2. That will be crucial to ensure that the government can continue to spend money.

The ANC’s easiest route would be with the DA’s support. But the process around the budget has brought into sharp relief the lack of bilateral processes between the two anchor parties in the GNU. 

A positive development is that both parties now agree that there should be constant dialogue and negotiations between them. “There has to be a back channel and ongoing dialogue. This situation has now forced [regular talks] into an essential condition for the functioning of the GNU,” a highly placed government source tells the FM.

Social Research Foundation chair Frans Cronje tells the FM that South Africa is in for a showdown should the two parties fail to find each other.

“The key partners in the GNU all have several options here. The ANC through Ramaphosa has the power to just fire the DA crowd, if he chooses. The DA crowd have the power to bring a motion of no confidence against Ramaphosa, if they choose.

“This is quite a standoff. I think in the early days of the GNU, the partners didn’t really employ their relative power and influence over the other, and they’ve started to do that now. I don’t know how it will end. Either they find themselves, they find each other, or the one lot tries to remove the other.”

While the National Treasury’s push for the double VAT hike can be justified, given the state of government finances, politically it is extremely damaging for the ANC, Cronje says. 

“I can’t believe the ANC put themselves in this position a month ago, let alone spending the next month doing the same thing and now fighting it for a second time. It’s extraordinary.” 

Polling by his foundation in 2022 and in 2024 showed that voters across racial and party lines take a dim view of tax increases. The upshot, says Cronje, is that both the ANC and the DA have been rational in the talks, and the process has revealed that there is considerable common ground between them.

“What would be worse is if the dispute was that the one side wanted to print and borrow money, and the other side didn’t. But, fortunately, both sides are sensible and pragmatic about what to do around the budget. What is certain is that the budget process could end the GNU, or work towards resetting the relationship and establishing a new balance of power.”

It is indeed a journey without maps for all parties — which may just make it easier to reach agreement, without the dead weight of precedent. This is not a problem that can be solved by recourse to old ideologies and policy positions.