South Africa’s delayed Budget at risk

The Democratic Alliance, the second-biggest party in South Africa’s ruling coalition, said it would only support the national budget if it met certain criteria, including placing more emphasis on economic growth. 

A previous iteration that was due to be tabled by Finance Minister Enoch Godongwana on February 19 was unprecedentedly delayed after the DA and other members of the 10-party coalition opposed a two-percentage-point increase in the value-added-tax rate to 17% that would have raised R191 billion over the next three fiscal years.

The DA will only support the re-worked budget to be presented on Wednesday if it puts more emphasis on igniting the economy, as the previous version had “clearly given up on growth,” the party’s leader John Steenhuisen said in an interview with Bloomberg on Saturday. 

The coalition government formed by the African National Congress after it lost its outright majority in elections last year has made accelerating economic growth that’s averaged less than 1% annually for more than a decade a priority.

The DA also wants Treasury to commit to the concessioning of the Cape Town port, deadlines for structural reforms that are underway, a spending review and an audit of “ghost employees” within the state, Steenhuisen said.

The party believes that these actions could generate R60 billion in the current budget cycle.

A “political meeting,” agreed to earlier this week after cabinet presented options to Treasury is needed to reach a “solid deal,” before the budget is tabled, Steenhuisen said. 

That deal could agree to support the Treasury raising the VAT rate by a smaller 0.5 percentage point in exchange for it reviewing spending and fast-tracking economic growth, people familiar with those discussions told Bloomberg on Friday.

A political deal before Wednesday would ensure that the coalition government would be united when Godongwana delivers his budget speech. 

Steenhuisen said it’s unlikely that the speech would be postponed again but if the DA’s demands aren’t met, the party would not vote for the budget to pass — resulting in a “scramble” in parliament in which the coalition would have to get support from parties outside of government.

“It can no longer be a case of my way or the highway when it comes to decisions of government,” he said.