South Africa’s Budget showdown

South Africa’s parliament is set to vote on a key piece of budget legislation amid uncertainty about the status of talks between the coalition government’s two biggest parties to resolve their differences over the spending plan.

On Tuesday, a panel of lawmakers backed a fiscal framework that underpins the national budget.

The legislation included Finance Minister Enoch Godongwana’s proposal to increase value-added tax — the key sticking point between the African National Congress and the Democratic Alliance — along with a non-binding proviso that the National Treasury find an alternative way to raise revenue.

The decision signalled that the ANC, the largest party in the so-called government of national unity, would try to push the framework through parliament without the support of the DA, its main partner.

The split over the budget has heightened investor anxiety about a potential fracture in the ruling alliance.

The ANC appears set to get the legislation over the line without the DA’s support, Barclays Plc Economist Michael Kafe said in a research note. “If this happens, we expect the market-friendly DA’s influence on economic policy to wane.”

The rand traded 0.4% weaker at 18.54 per dollar by 8:11 a.m. in Johannesburg.

President Cyril Ramaphosa, the head of the ANC, and DA leader John Steenhuisen held talks on Tuesday to discuss their differences over the budget, which the DA described as “a very good meeting.”

Subsequent to that, the ANC submitted a final offer for a budget agreement to the DA in advance of the vote, Johannesburg-based Business Day newspaper reported on Tuesday.

“We confirm that we have not received a document from the ANC about them acceding to our proposals,” DA spokesman Willie Aucamp said by phone. “No decision has been taken yet” on the DA’s future participation in the coalition government, he added.  

ANC spokeswoman Mahlengi Bhengu-Motsiri didn’t respond to a request for comment sent by text message.

The vote in parliament is scheduled for Wednesday afternoon. A simple majority of lawmakers in the 400-seat legislature need to approve the framework for it to pass.

The panel’s approval of the framework was secured after the ANC obtained support from ActionSA, a small opposition party that isn’t part of the coalition government. The ANC would need the support of several other parties for Wednesday’s vote to succeed. The Inkatha Freedom Party, a coalition member, has said it will back the framework.

The fourth-biggest party, the Economic Freedom Fighters, which isn’t part of the coalition and is a staunch opponent of the DA, has written to parliament Speaker Thoko Didiza asking the committee’s report on the fiscal framework and revenue proposals be withdrawn, and the vote be rescheduled because of procedural illegality in Tuesday’s meeting.