South Africa's Budget deadlock | GNU partners at odds over VAT and grants

With less than two days to go before Finance Minister Enoch Godongwana tables the 2025 Budget Speech, the Democratic Alliance (DA) and the African National Congress (ANC) have still not reached an agreement on major fiscal decisions.

The speech is scheduled to take place on Wednesday this week after it was postponed last month after the DA refused to sign it in protest against the 2% value-added tax (VAT) increase, which Godongwana was going to announce.

Last week, DA leader John Steenhuisen revealed that no agreement has been reached on the budget between the key partners of the Government of National Unity (GNU), despite Cabinet green-lighting the new budget.

In a post on X, Steenhuisen said "Good afternoon, South Africa. Constructive discussions on the budget are ongoing. There is no agreement yet, but we are working towards a resolution by March 12."

The DA subsequently over the weekend has put its foot down, saying it does not want to hear anything about VAT when Godongwana delivers the Budget.

“With the conclusion of the Cabinet input process into the Budget, the Minister of Finance and National Treasury are now set to finalise the budget and table it before Parliament on March 12," according to a DA statement. 

Cabinet reportedly rejected the reworked budget, this time without the 2% VAT increase. It argued that it would not work for the people.

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Over the weekend, Steenhuisen called on President Cyril Ramaphosa to schedule a phone call to discuss the lack of consensus within the GNU over the Budget but by Sunday evening, this had not taken place. 

The Sunday Times said that the GNU clearing house had agreed to a smaller VAT hike, but DA adviser and strategist Ryan Coetzee noted on X that no agreement on the budget had been reached.

“I suspect there is no agreement because the ANC has not accepted the DA's terms. And good luck with the EFF," Coetzee said. 

No VAT hike if SRD grant is reduced

Godongwana also emphasised the tough fiscal choices that must be made and added that SA may have to either increase VAT or reduce the Covid-19 Social Relief of Distress (SRD) grant.

He confirmed that a VAT hike would not be made if the SRD grant was scaled down.

“If you allowed me to cut the SRD, I wouldn’t increase anything. I’m faced with increased expenditures which are not in the budget,” Godongwana said.

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