South Africa’s GNU on the verge of collapse

South Africa’s Government of National Unity (GNU) is hanging by a thread, as relations between the coalition’s two biggest parties have hit rock bottom following recent Budget negotiations in Parliament.

The Bureau for Economic Research’s economics writer and researcher Claire Bisseker said these troubled negotiations could see the GNU fall apart.

South Africa’s current government, the GNU, was formed following the May 2024 general election when the ANC failed to secure a Parliamentary majority.

This was the first time in democratic South Africa’s history that an election did not result in an outright majority for a single party to lead the country for the next five years.

Therefore, rather than partnering with one big party or a handful of smaller parties, the ANC opted for a ‘Government of National Unity’-style coalition.

Dubbed a “new era” for South Africa, this coalition saw 11 political parties across the political spectrum join forces to constitute the country’s seventh administration. 

These parties are the ANC, DA, Patriotic Alliance, Inkatha Freedom Party, Good Party, Pan Africanist Congress of Azania, Freedom Front Plus, United Democratic Movement, Al Jama-ah, Rise Mzansi and the United Africans Transformation.

In his inauguration address on 19 June 2024, President Cyril Ramaphosa described the GNU as “the beginning of a new era” for the country.

He added that this coalition requires a common mission anchored in safeguarding national unity, peace, stability, inclusive economic growth, non-racialism, and non-sexism.

The formation of the GNU was viewed very positively by the markets and inspired optimism comparable to “Rampahoria” in 2019 when Ramaphosa took over as ANC President.

South African equities rallied, and the rand hit one of its strongest levels against the US dollar in years.

Despite this positive reaction, many doubts still lingered about the parties’ ability to overcome their political differences and work towards a common goal.

Many were particularly concerned about the relationship between the ANC and DA, as the two parties are diametrically opposed on several governance issues.

However, despite some points of contention over the past few months, the GNU has held strong and kept a largely united front – until recently.

Budget bother

The GNU’s solidarity reached a point of severe tension in February this year when, as is the norm, South Africa’s Finance Minister, Enoch Godongwana, was set to present the 2025 Budget.

The Budget was initially scheduled to be presented on 21 February 2025, but on that same day, News24 reported that not all of the GNU’s parties were prepared to sign off on it.

Ramaphosa reportedly called an emergency Cabinet meeting to convince the other GNU parties to give the green light for this Budget.

However, the parties could not reach a consensus, and for the first time in decades, South Africa’s Budget Speech was postponed to allow more time to address the other parties’ concerns.

DA leader John Steenhuisen later revealed that his party refused to sign off on a Budget that implemented tax increases for South Africans.

He specified that the original Budget planned to propose a two percentage points value-added tax increase, which the DA said would have been disastrous for the economy.

Therefore, the National Treasury had to go back to the drawing board and finally presented South Africa’s ‘Budget 2.0’ on 12 March 2025.

This version of the Budget also introduced a VAT hike, but rather than a two-percentage-point increase, it proposed a one-percentage-point increase split over two years.

However, this was still not enough for some GNU parties, who continued to oppose the ‘new’ Budget when it had to pass a vote to be adopted in the National Assembly.

The DA criticised the ANC’s reluctance to share control of economic policy, while the ANC baulked at the DA’s proposal to share management of economic policy.

Godongwana warned he would enlist support from a range of political parties to get the Budget approved – with or without the DA.

This led to significant fears that the GNU would fall apart, with some even speculating that the ANC would rope in the EFF to secure passage of the Budget, which would likely have been the final nail in the GNU coffin.

Budget shock

As the GNU parties continued to tussle and the implementation date of the VAT hike proposed in the Budget neared, many could not see how this matter would be resolved.

However, on Wednesday, the 2025 Budget was adopted in the National Assembly by 194 votes to 182.

As expected, the DA, FF+, MK and EFF voted against adopting the fiscal framework, specifically in objection to the VAT hike and what it deemed deeply unpopular personal income tax (PIT) measures.

To the surprise of many, ActionSA, Rise Mzansi, Bosa, GOOD, the IFP and a host of smaller parties supported the ANC in passing it.

Giving rise to even more confusion, ActionSA, following the vote, took to social media to proclaim that “South Africans will have no VAT increase, thanks to ActionSA”.

Later, it was explained that while ActionSA voted in favour of the ANC’s VAT-hike Budget, it did so on the condition that the National Treasury remove the VAT and PIT increases currently in the Budget.

While this sounds like a win-win situation for the GNU, Bisseker said it is not that simple.

“The motion which endorsed the fiscal framework, advanced by ActionSA and adopted by parliament’s joint finance committees, is problematic because it is conditional on removing R31.5 billion worth of VAT and PIT increases,” she said. 

“However, the motion only ‘recommends’ – rather than ‘instructs’ – the National Treasury to return to parliament within 30 days with alternative revenue measures and/or expenditure cuts to fill the gap.” 

“As such, it is not a legally binding requirement.”

There is another flaw in ActionSA’s plan – the National Treasury is not empowered to remove the VAT hike. 

“It will take effect from 1 May in terms of the VAT Act, irrespective of the fact that many parties in parliament are strongly opposed to it,” Bisseker explained. 

“The only way to prevent it from going ahead is for parliament to pass another law to this effect.”

Therefore, to stop the Budget 2.0 from coming into full effect, the DA has gone to court, arguing that the parliamentary committee process was unlawful and unconstitutional. 

The party also wants the court to stop the VAT increase, arguing that the Finance Minister should not be able to issue a VAT increase by diktat – an order or decree imposed by someone in power without popular consent – before parliament has had a chance to pronounce on the matter.

In addition, the DA’s Federal Executive is meeting to determine the party’s continued participation in the GNU.

“It’s clear that relations between the DA and the ANC have hit rock bottom, and the future of the GNU hangs by a thread,” Bisseker said. 

“If the DA does quit the GNU and return to the opposition benches, the ANC will probably seek to draw smaller parties like ActionSA, Bosa and Rise Mzansi into the GNU.”

However, she said this means the ANC would face a mighty tussle to muster a majority every time it seeks to pass legislation in the future.