By Pavan Kulkarni*
NEW DELHI | 1 March 2025 (IDN) — South Africa’s two largest parties, allied in the Government of National Unity, disagree on how to resolve the budget crisis: The ANC wants to raise taxes on the poor to continue funding social programs, while the DA prefers to slash public expenditure.
South Africa’s new Government of National Unity (GNU) recently failed to present its first budget, postponed for the first time in its post-Apartheid history. In the aftermath, the two main neoliberal parties in government are wrangling over policies that will further immiserate the working-class.
The African National Congress (ANC) wants to hike the Value Added Tax (VAT), the second largest contributor to tax revenues, from 15% to 17%. This will further inflate prices at a time when the working class is already sinking deeper into debt. People are forced to borrow money merely to “survive from month to month on their poor earnings,” protested Irvin Jim, General Secretary of the country’s largest union, the National Union of Metalworkers of South Africa (NUMSA).
Already forced to spend almost 60% of their earnings on food, transport and electricity — on which a further 12.7% tariff hike is also looming — the proposed “increase in VAT would cripple them even further,” he added in his statement on February 25.
Opposition to the VAT hike has also come from the country’s largest trade union federation, the Congress of South African Trade Unions (COSATU), which had expelled NUMSA in 2014 due to the latter’s refusal to continue supporting ANC as its neoliberal reforms accelerated.
The VAT increase would “send a message to society that the government cares more about balancing tables and graphs [rather than about]… workers being able to put food on the table and pay for electricity,” read COSATU’s statement earlier this month. “This is a message that politicians would be very wise to listen to as we head towards the highly contested 2026 local government elections, in particular our ally, the African National Congress,” it added.
The other historic ally of the ANC within its Tripartite Alliance, the South African Communist Party (SACP), has also vehemently opposed the VAT hike. “You are plunging” South Africans “deeper into hunger… That cannot be the way forward,” its spokesperson Alex Mashilo said, ahead of the budget presentation, originally scheduled for February 19.
Complaining that the ANC had not held any consultation with the SACP in preparing the budget policy statement, he added, “So, the best is to communicate our positions publicly, as an independent organization and to avoid being confined behind closed doors, where no one knows what our position is.”
Betraying left allies, the ANC leans on the right-wing party
Ignoring the concerns raised from its left, including by its historic allies in the Tripartite Alliance, the ANC instead counted on the support of the right-wing Democratic Alliance (DA) to push the VAT hike through parliament.
The DA is the second largest party in the parliament. ANC leaders have historically attacked the DA for pushing anti-poor policies, even as the ANC itself was deepening neoliberal reforms in South Africa.
Amid the resulting severe cost of living crisis, the ANC, for the first time since the defeat of Apartheid in 1994, failed to secure a sufficient majority in last year’s election. Unable to form a government by itself, it allied with its main rival, the DA, to form the Government of National Unity (GNU).
On the eve of GNU’s first budget to be presented on February 19, hundreds of protesters marched through Cape Town, gathering outside the parliament for a demonstration against budget cuts and the VAT hike.
The Treasury forecasts that this hike will generate an additional R60 billion in revenue, which Finance Minister Godongwana deemed necessary to continue funding social services like health and education.
However, several analysts have questioned the Treasury’s forecast. When the VAT was last raised from 14% to 15% in 2018, the additional revenue generated was R22 billion short of the Treasury’s forecast, in no small part because the resulting price rise reduced overall spending as it ate into real incomes.
No sense to whip taxpayers and ignore deniers
“Instead, we call for increased taxation on the wealthy and corporations and stricter exchange controls to curb capital flight and tax evasion by the unpatriotic bourgeoisie,” read a statement by the South African Federation of Trade Unions (SAFTU).
According to a policy brief published by the Institute for Economic Justice (IEJ) last February, wealth tax can generate R70-R160 billion in additional revenue. Reversing the “ineffective Corporate Income Tax cut” could yield another R12 billion.
By “opting for a VAT increase” instead of these alternatives, the “Treasury is making its class allegiance clear”, said SAFTU, the second-largest trade union federation formed in 2017 as a left alternative to the ANC-allied COSATU.
COSATU also took part in the protest on February 18. It has pointed out that simply injecting an additional R3 billion into the cash-strapped South African Revenue Services (SARS) “will enable it to boost tax compliance from 64% to 67% generating an additional R60 billion”, which the ANC is seeking through VAT hike. “It makes no sense to whip those who pay their taxes and ignore those who don’t,” COSATU maintains.
Almost a dozen other organizations, including Equal Education, Cry of the Xcluded, People’s Health Movement and Rural Women’s Assembly, also joined the march. Leaders of these organizations spoke of how essential social services like education, health etc were crumbling due to the austerity imposed by the neoliberal policies the government has been pursuing in an attempt to ‘balance the budget’.
“Mass unemployment, hunger, collapsing municipalities, and an economy that is going nowhere — these are the real emergencies, not the government’s debt. While the government is obsessed over budget cuts, ten million people go hungry each week,” complained the petition, read outside St George’s Cathedral down Parliament Street that evening.
An unprecedented failure
The next morning, as the nation waited keenly for the Finance Minister’s budget speech, the parliament’s Speaker, Thoko Didiza, announced to the assembled legislators that it had been postponed. Because “the parties in the executive” – namely the ANC and the DA – have not been able to “find one another in proposals of the budget,” the “cabinet decided not to come” so as to “allow themselves enough time to relook at the budget and come back to this house in March.” March 12 was later confirmed as the new date.
Calling it “unprecedented,” opposition member of parliament, Julius Malema, leader of the left-leaning Economic Freedom Fighters (EFF), the fourth largest party in the parliament, demanded, “Let the budget be presented here and let parliament decide… whether to accept or not.” The executive’s inability to present the budget on time means that “there is no government, it has collapsed,” he insisted.
“To have a day like this is a serious indication of the crisis this country is facing. This country has no leadership,” added Mzwanele Manyi of uMkhonto weSizwe or the MK, the third largest party in the parliament. Formed in December 2023, only months before the election, the MK is a splinter from the ANC led by South Africa’s former president, Jacob Zuma.
John Steenhuisen, leader of the DA, whose refusal to support the VAT hike led to this historic postponement of the budget presentation, told the media, “We couldn’t in good conscience support” the VAT hike “given the current economic circumstances in South Africa.”
“The DA is deceiving the entire South African working class”
Amid a flurry of news reports about the DA stopping the widely opposed VAT hike, NUMSA warned against mistaking this “party of White Power and Privilege in South Africa” for an ally of its working class.
“The DA is deceiving the entire South African working class by pretending to be fighting for its interests by rejecting the VAT increase while simultaneously” opposing “measures to tax the owners of capital to fund vital government programs,” the union’s General Secretary Irvin Jim said in his statement.
While the ANC chose a regressive tax like VAT, “purportedly so that the GNU can continue to service its social commitments to the South African people,” the DA, opposed to all tax hikes, wants instead to slash the public expenditure. It has “proposed further cuts to social programs which benefit largely the Black and African working class”, hastening “the privatization of energy and the ports,” and the dilution of labor protections, he added.
Amid an unemployment rate exceeding 40%, the DA has also proposed a “hiring freeze for all non-essential government positions for 12 months” as one of “the immediate cost-cutting measures that will free up at least R60 billion,” which the ANC wanted to raise by hiking VAT.
Following a Politburo meeting last weekend, the SACP has called on the ANC for “an urgent consultative alliance process” to explore alternatives, insisting that “we cannot pursue taxes that punish the poor while we leave the rich smiling all the way to the banks.
Its spokesperson Mashilo stressed the need to raise additional revenue for public spending through a “strengthened regulation of the capital account, a decisive clampdown on illicit financial flows, and aggressive confrontation of base erosion and profit shifting. We are calling” for a “wealth tax because South Africa is one of the most unequal countries in the world.”
In a meeting earlier this week, the cabinet reportedly discussed a wealth tax. However, the “DA will not accept any measures which will force South African and foreign capitalists to share the massive profits they make out of our labor and natural wealth, through appropriate taxes,” Irvin Jim maintains.
“The ANC itself in the GNU is too weak, too pro-business and therefore incapable of protecting the interests of the majority of the people of this country, who are the working class. What is to be done? It is time for the working class of all races, unionized or un-unionized, to unite in opposition to the attacks on our lives by the GNU government.” [IDN-InDepthNews]
Original link: https://peoplesdispatch.org/2025/03/01/budget-crisis-exposes-the-contradictions-in-south-africas-government-of-national-unity/
Photo: Mobilization against budget cuts and for fully funded public services ahead of South Africa’s 2025 budget presentation. Photo: Equal Education Law Center/X
