Fractured GNU: Is it time for the DA to walk away? - Ivo Vegter

Key topics:VAT hike scrapped after DA legal pressureANC sidelines DA in press conference showdownGNU fractures deepen, leaving the future uncertain.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..By Ivo Vegter*Yesterday was a red-letter day in the history of the Government of National Unity. Of unity, there was no sign.As dawn broke yesterday, Thursday 24 April 2025, it looked like the GNU’s days were numbered.First, a late-night announcement from the Democratic Alliance (DA) confirmed a late-night report in Business Day, which said finance minister Enoch Godongwana “proposed an out-of-court settlement with the DA that would see the contentious 0.5 percentage point VAT hike terminated”.The DA’s message said: “The DA can confirm reports that lawyers acting for the Minister of Finance have approached our lawyers proposing an out-of-court settlement, in the matter the DA brought to interdict the VAT increase scheduled for May 1.”The party added that it was awaiting a formal, written settlement offer, and that it was scheduled to meet with the ANC to discuss the matter on Thursday.Such a settlement would pre-empt, in part, a pending High Court ruling in a case filed by the DA that sought to interdict the VAT increase on 1 May. The case was filed on 3 April, two days after Parliament voted to pass the Fiscal Framework and Revenue Proposals, and the ruling is scheduled for 29 April, two days before the VAT increase was due to take effect.VAT hike reversedThen, National Treasury put out a statement saying that the VAT hike would not go ahead, “[following] extensive consultations with political parties”. That the VAT rate will remain at 15% will be contained in the Rates and Monetary Amounts and the Amendment of Revenue Laws Bill, which, presumably, will amend the Fiscal Framework and Revenue Proposals adopted by Parliament on 1 April. Treasury will also withdraw the Appropriation Bill and the Division of Revenue Bill, to adjust both to compensate for the R75 billion that the fiscus is now expected to forgo.The DA declared victory: “Major victory for South Africans! The disastrous VAT hike has officially been scrapped. This would not have happened without your pressure and the DA’s relentless fight – in Parliament, in Cabinet, and in court. This is a win for every citizen who cannot afford higher prices.”The ANC promptly scheduled a “joint media briefing” for 10:00, involving the ANC, Inkatha Freedom Party, ActionSA, Pan Africanist Congress, Rise Mzansi, Build One SA, United Democratic Movement, Good Party, Al-Jamah, and the Patriotic Alliance, “as parties that have constructively engaged in fiscal framework deliberations”.Meanwhile, the DA scheduled its own press conference for 8:15.End of the GNU?That the ANC press conference excluded the DA, the second-largest party in the GNU, and included ActionSA and Build One SA, neither of which are members of the GNU, raised the spectre of an imminent dissolution of the GNU.Read more:.John Matisonn: Godongwana’s VAT U-turn - What the climb-down reveals about SA’s fiscal politics.Perhaps not incidentally, the parties in the ANC’s joint briefing collectively occupy exactly 202 seats in the National Assembly, which could give them a governing majority in the 400-seat house.I thought the DA had won, defeating the VAT increase, but at the cost of its place in the GNU, and that ActionSA and BOSA, for siding with the ANC on the VAT increase, had earned themselves an unexpected and undeserved seat at the table.I was sure one of the two press conferences would announce the formal end of the GNU as we knew it, and the rise of a new GNU.Court applicationIn its court application, the DA had argued firstly that the fiscal framework as adopted was procedurally unsound and unlawful. The finance committees in the National Assembly and the National Council of Provinces, instead of either adopting or rejecting the proposed framework, instead added a non-binding recommendation that the finance minister should take 30 days to reconsider the VAT increase and the decision not to adjust income tax brackets for inflation, and to find alternative sources of revenue and/or expenditure savings to compensate.Such an expectation of revising the fiscal framework after it was already passed by Parliament was improper, the DA’s case said. It also noted that the effective date of the VAT increase on 1 May fell only 28 days after the adoption of the fiscal framework, which made a nonsense of the 30-day period for revision.The second part of the DA’s application challenges clause 7(4) in the VAT Act which delegates Parliament’s power of taxation to the finance minister, empowering the minister to raise or lower VAT simply by announcement, provided that Parliament endorses that decision within 12 months by passing appropriate law.Press spectacleIn the DA’s press briefing, federal chairperson Helen Zille did not say the party would leave the GNU, or that the GNU would be dissolved.The closest to a hint that she dropped was when she said: “We don’t know what’s going to come out of today’s meeting. Anything can come out of today’s meeting with the smaller parties. I mean, you know, I’m sure many of them would like to be in the coalition government, so let’s see if the ANC is going to do something unilateral there.”The ANC-led joint briefing was a spectacle. Starting 40 minutes late, it lasted for over two hours, mostly to let every single insignificant party take a swing at the DA. It was vicious.For voting against the VAT increase from the start and trying to negotiate for pro-growth concessions, the DA was accused of extortion. It was called a party of hypocrites and liars that wanted to bring back apartheid.Kenny Kunene, of the Patriotic Alliance, laid into the DA at length, and then piously declaimed that “national interests are more important than scoring party-political points”. Oh, the irony.Taking creditAs expected, they all took credit for the reversal. Despite voting in favour of the fiscal framework that included a one percentage point VAT hike to be phased in over two years (down from the original two percentage point hike that the DA thwarted back in February), every single one of them – including even the ANC – now claimed to have been against the VAT increase in the first place, and accused the DA of being prepared to vote for an increase if some other concessions were made.Read more:.Leaked DA document exposes rift in GNU over Budget 2025, VAT hike and ANC power-sharing.All denied loudly that the DA’s legal action, and the near certainty that the court would rule in its favour, had anything to do with the decision.“Perfect budget”For the ANC, secretary-general Fikile Mbalula claimed that the ANC had decided to reverse the hike “before Easter”, even though last week Thursday, finance minister Enoch Godongwana said that he saw “no alternative” to a VAT increase, and even though ANC lawyers on Tuesday told the High Court in a sworn affidavit that the VAT increase was necessary, was unavoidable, and would go ahead.Later on, he said the ANC had reservations about the budget “all along”. If that were true, why did the Economic Freedom Fighters join the DA’s court case to argue that the ANC had been dishonest when it committed to review the VAT increase?He denied that anyone from the ANC had asked the DA to cease legal action, which comes dangerously close to denying that lawyers for the minister of finance offered the DA an out-of-court settlement, as reported and confirmed just a day earlier.Mbalula conceded that if the ANC had more experience governing in a coalition, it might have consulted other parties before tabling the budget – an obligation that might have occurred to a fairly dull-witted child.After fighting vigorously, first for a two point VAT increase, and then for a one point VAT increase over two years, he now called the revised budget “the most perfect budget” that “cushions the poor” and would “break the austerity cycle”.In short, he was lying through his teeth.There was no “austerity cycle”. The government has not cut spending. It has not reduced wasteful, fruitless and fraudulent expenditures. It has not reined in tender corruption. It has not tried to make government operations more efficient by (just spit balling here) replacing pens and paper with computers. It has not reduced the size, salaries, or perks of cabinet. It has given above-inflation increases to public sector employees and given above-inflation increases to social grant recipients.And there was absolutely no talk of reversing the VAT hike until Wednesday night.Crowing victoryHerman Mashaba and Mmusi Maimane, leaders of ActionSA and Build One SA, respectively, crowed victory, claiming that it was their commitment to negotiating with the ANC after the fiscal framework was already passed that resulted in the reversal.This is hard to believe, given that even the judge in the DA case called ActionSA naïve for believing that their recommendation would be taken seriously.Renegotiating a law after it has been passed is a rather cart-before-the-horse political strategy, and the “recommendation” that the minister revisit the VAT increase and tax bracket matter was never binding in the first place.The court’s ruling, however, would have been binding, and highly embarrassing for the ANC.When last has an ANC minister voluntarily changed their mind about something without having to be forced to do so by a court of law?Neither explained what happened to the reconsideration of the decision not to adjust tax brackets for inflation, and why their masterful negotiation did not manage to change the finance minister’s mind on that point, too.Hints and liesNobody said outright that the GNU was dead, but a lot of hints were dropped.The vitriol aimed at the DA alone would have done for any coalition in any government in the world.Mbalula aimed a few barbs at the DA, concluding: “That you’re still here, we’re shocked.”Kunene said he “hopes to see a different GNU composition in the future”.Read more:.VAT freeze triggers budget reboot.The secretary-general of the Pan Africanist Congress of Azania, Apa Pooe, said Mashaba’s speech was great, and ActionSA deserves a place in the GNU.Songezo Zibi, leader of Rise Mzansi, said that the budget could not be “held hostage to issues that are not part of revenue or appropriation”.Nqabayomzi Kwankwa, deputy president of the United Democratic Movement, said that “a state without a budget is a doomed state.”He added: “Without a fiscal framework, government will shut down, and salaries of public servants won’t be paid. There will be a constitutional crisis.”He said all government operations would become unlawful, social grants, bursaries, and emergency response services would all come to a halt.All of this is false. Section 29 of the Public Finance Management Act provides for spending in the case where a budget is not passed before the start of the new financial year, according to amounts contained in the previous year’s budget.There was never a risk of a government shutdown. That’s a lie to justify giving the ANC the opportunity to raise VAT, which was only thwarted by the DA’s legal action.Non-growth budgetWhat actually happened is that the ANC, anticipating defeat on the VAT hike in the courts, was forced into a humiliating climbdown.It then approached non-GNU parties in order to gather a nominal majority in the National Assembly to agree to the VAT hike reversal, so that it could claim that it was responding to “broad consultation”.These parties were used, twice over. First to get the VAT hike passed without having to submit to any pro-growth reforms, and then to get it reversed without appearing to have egg on its face.That any of the parties at the ANC’s shindig had the gall to claim credit for the VAT reversal is testament to their naïveté. The ANC would never have budged without staring down the barrel of an adverse High Court ruling.None of them were prepared to call for Godongwana’s resignation, either. There’s not a spine among them.Can the GNU survive?The question now is not only whether the GNU can survive, but whether it should survive.The DA says that its victory is testament of its power to influence government policy. In reality, this VAT hike was peanuts. R75 billion in a multi-trillion rand budget is hardly “reform”. It didn’t get any concessions out of the ANC. It didn’t defeat the bracket creep provisions, so it’s still a tax-and-spend budget.Not only did it not get anything resembling the pro-growth, pro-trade, and pro-investment budget that it campaigned for, besides thwarting the VAT hike, it secured hardly any changes to business as usual.The ANC routinely ignores the DA. Zille repeatedly said that the ANC doesn’t bother to abide by the letter of intent that established the GNU, which requires it to seek a sufficient consensus for major policy decisions.There is obviously no love lost between GNU parties right now. It’s open warfare. Zille talks about a “low-trust environment”, which puts it very diplomatically.The ANC, by going outside the GNU, and ignoring its largest GNU ally, is obviously eyeing a Parliamentary majority that excludes the DA.Neither the DA nor the ANC wants to be the first to blink. Neither wants to be blamed for blowing up the GNU. Both will get bad press for walking away.Dead in the waterI don’t see the upside to the DA remaining in the GNU, however. South Africa’s economy is circling the drain, either way. Whether it collapses a little faster or a little slower is neither here nor there, in the big picture.By remaining in the GNU, the DA takes responsibility for the government’s inability to rein in spending, attract investors, and spark private sector growth. Its influence is minimal. None of the other parties respect it; they openly mock it.The ANC’s support appears to be dwindling fast. It may not even hold together until 2029.Perhaps it is time to return to the opposition benches, and build a popular platform from which to launch a serious campaign to become the largest party in government at the next elections.This GNU looks dead in the water, to me..Ivo Vegter* is a freelance journalist, columnist and speaker who loves debunking myths and misconceptions, and addresses topics from the perspective of individual liberty and free markets..This article was first published by DailyFriend and is republished with permission.

Fractured GNU: Is it time for the DA to walk away? - Ivo Vegter

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