ActionSA has taken a big political risk — one that could make or break the party.
“There will come a time when our six votes will determine the ANC’s survival,” warns party chair Michael Beaumont in a candid interview with the FM. “It may be next month, it may be next week, it may be next year, but if the ANC reneges on its commitments, we will revisit that upon them tenfold.”
The impasse over the budget, which has threatened to collapse the participation of the DA in the GNU, is partly a result of ActionSA’s vote with the ANC to pass the fiscal framework in parliament last week.
ActionSA glibly announced that it had defeated finance minister Enoch Godongwana’s 0.5 percentage point VAT increase through its negotiations with the ANC immediately after the sitting of the standing committee of finance on Tuesday. Only, this was not the case, and the real negotiation with the National Treasury only happened this week.
It was widely believed that ActionSA was duped into the vote by the ANC, simply because it did not understand the parliamentary process, which unravelled quickly in a tense political environment. ActionSA was overzealous with its communication after the vote, posturing that it could accomplish from outside the GNU what its archrival, the DA, could not from the inside — but it insists that it was not duped.
Simply put, if these taxes are not removed, there will be no passing of a budget
— Michael Beaumont
Either way, the party took a narrowly calculated risk, one that could still see it left in the dust. However, should it succeed in getting the VAT hike scrapped, the risk will have been worth it. “We have already found R100bn [in savings], and we handed over a document to the finance minister. We will be having engagements with the National Treasury [this week],” says Beaumont.
This was after Godongwana’s first iteration of the budget was rejected in February by ministers from his party, the DA and the host of smaller parties in the GNU, forcing the Treasury to put the tabling of the budget on hold.
Two weeks later, the Treasury still could not find the money to fill the hole in revenue to cover debt and spending for the next year without a VAT hike. If the R100bn savings identified by ActionSA are real, it is a mystery how Treasury officials could not find just R28bn to prevent the VAT hike. This is despite submissions from a variety of quarters, including Cosatu, which proposed a reasonable option of accessing funds from the Government Employees Pension Fund.
Beaumont says now that politicians are involved, it is more likely that work will actually be done to find the money — left to administrators, this did not happen.
“When the politicians are completely absent and leave the process to senior officials in the Treasury, these officials — who, with the greatest of respect, possess great financial acumen, among other virtues — don’t have any appreciation of the politics of the situation. Simply put, if these taxes are not removed, there will be no passing of a budget,” says Beaumont.
If Godongwana does not retract the VAT increase, ActionSA will not support two further pieces of legislation required to pass the budget. One problem is that these votes will happen only after the VAT increase takes effect on May 1.
Still, ActionSA is undeterred. Beaumont says: “The VAT Act of 1991 explicitly prescribes that the VAT amount goes up by the amount and on the date announced by the minister in his budget speech, which happens to be May 1. So VAT is going up on May 1.” The only way the VAT hike can now be prevented before then is through a government gazette or introducing new legislation, he says, and ActionSA will still make an effort to achieve that outcome.
As a party with six seats in parliament, ActionSA will likely continue to be a power broker, given the ANC’s loss of its overall majority. At the same time, the party — as happened last week — could be used by the ANC as a way to keep the DA in check.
Yet, even if the VAT hike is scrapped and ActionSA wins in the end, its participation in the GNU is not guaranteed. The ANC’s national working committee decided on Monday to resume talks on the budget with all parties, including those inside and outside the GNU.
Strictly negotiated reforms will have to be discussed and agreed upon before ActionSA even considers entering the governing coalition. Beaumont says the GNU is failing because negotiations last year did not enter the reform space at all.
“It is structurally flawed, and that’s why it has failed. All they negotiated was whose bums were going to be in German sedans. In two weeks, that’s all they accomplished,” he says.
ActionSA risks a huge failure in its approach, but should the VAT hike be scrapped before South Africans begin feeling the pain, the party could receive a much-needed shot in the arm ahead of the local government election next year.
In a matter of weeks, it will be painfully or blissfully aware of whether it was a risk worth taking.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.