The African National Congress (ANC) is considering seeking support from the Economic Freedom Fighters (EFF) to secure the passage of Finance Minister Enoch Godongwana’s budget, following a deadlock within the Government of National Unity (GNU).
A highly contested budget vote, originally scheduled for 19 February, was postponed to 12 March after GNU partners failed to reach a consensus.
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The Democratic Alliance (DA) took credit for blocking a 2% VAT increase, arguing it would worsen financial strain on low-income South Africans. Other GNU members, however, insisted the decision not to vote for the budget was collectively agreed upon.
Treasury has since proposed a 0.75% VAT increase as a compromise, but the DA remains firmly opposed, warning of negative effects on struggling households.
“If the EFF wants to support a VAT increase that will hurt the poor, then they must explain that to their electorate,” DA leader John Steenhuisen told the Sunday Times.
The party is reportedly frustrated with the DA’s strong anti-VAT stance, accusing the party of politicising the issue to the detriment of the GNU.
According to the report, the majority party has warned the DA that, if it does not soften its position, the ruling party may seek support from the EFF to pass the budget.
Meanwhile, several alternatives to the VAT hike have been proposed, including;
– Higher taxes on the wealthy
– Modernising SARS to improve tax collection
– Cracking down on illicit financial flows
– Reduced government spending
– Increased debt issuance
– Using South Africa’s Gold & Foreign Exchange Contingency Reserve
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However, the South African Federation of Trade Unions (Saftu) strongly opposes the VAT increase, calling it a “direct assault on the working class.”
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Instead, the union has called for, higher corporate taxes, tighter exchange controls and stronger measures to curb tax evasion
With the 12 March deadline approaching, pressure is mounting on GNU members to reach a compromise. If the African National Congress and DA remain at odds, an unexpected alliance with the EFF could reshape the budget negotiations and impact South Africa’s economic trajectory.
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