Leaked DA document exposes rift in GNU over Budget 2025, VAT hike and ANC power-sharing

Key topics:.Tensions in the GNU: ANC's unilateral decisions undermine partnership.VAT hike proposals linked to growth reforms and reducing poor tax burden.Structural reforms needed to address economic growth, job creation, and debt..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..A way forward on Budget 2025.1. Introduction.The crisis that currently confronts the GNU is not whether a 0.5% increase in VAT is appropriate. After all, the DA has supported VAT increases in the past when the fiscal position called for it. The real crisis is in the way that the GNU operates. After 10 months of existence as a VAT increase, we proposed a series of measures aimed at reducing the burden on the poor, while also providing temporary 0.5% increases in VAT provided it was accompanied by measures to ensure our fiscal position into the future. Both these proposals were rejected by the ANC..The question that confronts us, therefore, is whether there exists a way to make the GNU work for the benefit of all South Africans, whether or not the ANC is prepared to share power and control over decision-making with its GNU partners in a meaningful way that allows for a better life into the future..In a context where one party has the majority, following the elections, it is clear that the GNU must be based on a partnership model where parties in the GNU can all participate in Statements of Intent on which all GNU parties agree. The ANC does not seem to understand this, and continues with its unilateral decision-making processes as if nothing has changed..Since the inception of the GNU, the ANC has not sought to build consensus amongst its GNU partners on any meaningful way, which, for us, has meant that positions it has adopted have not been sufficiently creative and problem-solving in nature. It has become clear that the ANC does not value the GNU partnership in the way that it was initially presented..This is the first reason why we are now at an impasse. Had the ANC negotiated on the budget in a meaningful way from the start, we would not have been placed in this position. The lack of support of parliament has been presented within three weeks of the budget being presented to parliament, which has left little time for meaningful engagement..It is important to emphasize that this is not the first time that a tactical "win" for the budget has been a strategic loss for the GNU. The GNU is looking to a future where the ANC does not have a majority, and where we need to accept that the ANC must share power more than ever before. We accept that the ANC must share power in order to take partnership with both parties, which will continue to take partnerships seriously..The second reason we are at an impasse on the budget is the lack of agreement on key structural reforms. If we are going to impose a burden on the poor, then the very least the GNU can do is to ensure that the economy grows, that jobs are created, and that the burden of taxation on the poor is reduced over time. Our proposal was clear: the DA is deeply committed to the situation. Our purpose in the GNU is to shift the trajectory of our country and therefore, the country of the parties in the GNU..Our fiscal situation is directly linked to our economic failures. We have a debt-to-GDP ratio of 74% – a situation that has not been seen since 1950. We are spending 21 cents of every rand on debt servicing costs, which is more than we spend on health, education, policing, or welfare – areas that will target expenditure budgets more than ever before..Therefore, unless we reprioritize spending, and reduce the burden of taxation on the poor, we will simply not be able to achieve inclusive growth. We are committed to supporting increases in VAT if accompanied by measures to support three key measures, without which our commitment to the GNU will be tested:.A series of growth reforms and accelerated implementation that can drive faster short-term growth and reduce the burden of taxation on the poor by 2030 through a 100-basis point cut in interest rates.A comprehensive review of spending that reduces the burden of taxation on the poor by 2030.A long-term strategy for economic growth..Working together, we have to work within the GNU to ensure South Africans are better off, and that the GNU can deliver on its mandate. We must also ensure that the GNU is successful..What follows is a clearly defined set of proposals the ANC must take seriously:.Read more: SA Budget: VAT hike, massive infrastructure spend, and debt peaks.AGREEMENT ON KEY ACTIONS FOR INCLUSIVE GROWTH AND JOB CREATION.Pillar 1: Accelerated implementation of economic reform.The GNU commits to implementing the following measures (termed inclusive economic growth):.Accelerated implementation of economic reform through:.Operation Vulindlela (OV) will be launched in April 2025 following approval by cabinet and funding secured by National Treasury. OV departments and agencies, OV will continue to be led by a senior official who will report to the Minister in the Presidency and overseen by a joint committee of the Presidency and National Treasury.Private sector participation in ports and rail by allowing third-party access to the freight rail network by 2025, and private sector investment in port operations by 2026, including the issuing of long-term concessions to manage and operate port terminals such as Durban, Ngqura, and Cape Town.A comprehensive energy sector reform to address high energy costs, by allowing municipalities to procure power directly from independent power producers by 2026, and implementing a competitive electricity market by 2027.Digital transformation of government to improve service delivery by completing the rollout of broadband connectivity to all government buildings by 2026, and implementing a digital nomad visa by 2025 to attract skilled professionals.Reform of the regulatory framework for the ICT sector in line with international best practice by 2026, to ensure competition, affordability, and access to digital services for citizens and businesses..Reform of the regulatory framework and financing:.A streamlined regulatory framework for energy will be implemented to increase investment by the private sector through a public-private partnership (PPP) by June 2025. A credit enhancement facility will be established to support investment in renewable energy, battery storage, and projects to support the transition to a low-carbon economy.Independent Transmission Projects: Regulations will be finalized by the end of 2025 for the private sector to invest in transmission infrastructure, with the first projects to be launched by 2026.Digital transformation of government to improve service delivery by completing the rollout of broadband connectivity to all government buildings by 2026, and implementing a digital nomad visa by 2025 to attract skilled professionals..Pillar 2: A comprehensive review of government spending.The GNU commits to a comprehensive review of government spending that ensures that wasteful expenditure is eliminated, that the burden of taxation on the poor is reduced, and that the GNU delivers on its mandate to grow the economy and create jobs..To achieve this, we propose the following key actions:.A joint technical committee to be established by April 2025 to review government expenditure. This will be chaired by the Deputy President, including the Minister of Planning, Monitoring and Evaluation, the Minister of Finance, the Minister of Public Service and Administration, and the Minister of Trade, Industry, and Competition, as well as other relevant ministers as determined by the President.The review will focus on identifying programmes that can be closed down immediately. These will include programmes that are not effective, efficient, or delivering value for money, as well as those that are not aligned with the priorities of the GNU. The review will also consider the rationalization of entities, including the reduction of the number of departments, the consolidation of entities, and the reduction of overlapping mandates.The review will consider the following areas of focus:Efficiency in spending: Ensuring that every rand spent delivers maximum value for money.Alignment with priorities: Ensuring that spending is aligned with the priorities of the GNU, including economic growth, job creation, and poverty reduction.Reduction of wasteful expenditure: Identifying and eliminating wasteful expenditure, including on luxury items, unnecessary travel, and excessive staffing..Pillar 3: A long-term strategy for economic growth.The GNU commits to a long-term strategy for economic growth that ensures that the economy grows at a rate of 5% per annum by 2030, that unemployment is reduced to 20% by 2030, and that the debt-to-GDP ratio is reduced to 60% by 2030..To achieve this, we propose the following key actions:.GNU parties will support a 0.5% increase in VAT, but on a temporary basis. It must be reviewed annually by the GNU partners, with a clear commitment that the 0.5% increase will be in effect for only 12 months unless economic growth has increased by at least 3% in that period, or debt-to-GDP has fallen below 70%..Read also:.Ramaphosa new plan for VAT hike to resolve budget standoffSteenhuisen slams ANC's 'disastrous' VAT hike plan—DA fights backThe 2% VAT hike Treasury kept quiet—And why they pushed for it

Leaked DA document exposes rift in GNU over Budget 2025, VAT hike and ANC power-sharing

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