The VAT hike reversal has deepened fractures in the GNU and raised questions about who really calls the shots in fiscal policy.
As political parties hurried to take credit for the decision to halt a value-added tax (VAT) increase, accusing each other of extortion and deception, the VAT battle has tarnished the credibility of National Treasury and its political head, Finance Minister Enoch Godongwana, according to experts.
The ANC-DA fallout led to substantive damage in the government of national unity (GNU).
Midnight U-turn criticism
Despite a bruising VAT court challenge by the DA, which led to National Treasury offering to settle and making a midnight about-turn on the tax increase, political analyst Daniel Silke was optimistic about the GNU “hobbling along, if indeed the ANC and the DA find each other – going back to the level of mutual respect”.
He added that “the ANC can no longer dictate policy”. The credibility issue “is not good for South Africa facing volatility on global markets, geopolitical risks and the scrutiny of the Trump administration, with the International Monetary Fund projecting much lower growth rates.
“This was just a Band-Aid budget – the lazy option of putting up taxes was the final outcome.”
DA can’t hold the budget ‘hostage’
Rise Mzansi leader Songezo Zibi said the finance minister could not be held hostage by the DA over its other political priorities, saying the VAT increase reversal has freed him to focus on the budget.
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Zibi said: “This process has been about freeing the finance minister from extortion. We have an outcome that the finance minister feels comfortable to own, together with the parties that hold the majority in parliament. We cannot hold budgets hostage to other political priorities that have nothing to do with appropriation.”
Maintaining that the VAT fight by the DA and the EFF was “legitimate”, independent political analyst Sandile Swana said: “We have not had a Treasury that has been able to run the type of economy that has kept pace with the 4.7% GDP growth rate experienced by the developing world.”
‘Right decision’
Prof Raymond Parsons, of the North-West University Business School, said the decision by National Treasury was “right in the circumstances”.
“While the credibility of National Treasury may have been dented by the VAT controversy, it is now more necessary for SA to speedily accelerate key structural reforms to expand the economy.
“Fiscal sustainability needs to be reinforced by stronger economic growth that enlarges the tax base – boosting tax revenues,” said Parsons.
DA leader John Steenhuisen claimed his party had influenced the decision through the DA and the EFF’s court challenge to the increase.
ALSO READ: Who really won the VAT fight? GNU shakes as parties cry ‘deception’
“After the DA’s opposition to VAT in Cabinet, parliament and the courts, Treasury had no choice but to reverse its VAT hike decision.”
DA takes aim at ANC
DA Federal Council chair Helen Zille is unsure what the next step for the DA will be after the party was sidelined by the ANC once again.
She described the ANC as an untrustworthy coalition partner. “The ANC deliberately deceived the smaller parties into believing that they are prepared to drop the 0.5% increase when that was not their intention.
“This continues to expose how the ANC deals with its partners in whatever forum. It’s important that this level of deception that happens repeatedly is also exposed to the voting public.”
Zille said coalitions should be based on mutual trust.
“The big problem is we have to operate in a low-trust environment. There is a low-trust environment within the ANC, but that also makes the trust environment between the ANC and its coalition partners very difficult to establish.”
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