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Experts have warned that the African National Congress (ANC) Value Added Tax (VAT) push threatens the stability of the Government of National Unity (GNU). This follows Finance Minister Enoch Godongwana’s setting to table the much-anticipated 12 March budget.
While the Democratic Alliance (DA) has called for substantial government spending cuts to prioritise job creation programmes instead of increasing VAT.
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“The ANC’s determination to push through this tax hike, despite opposition from its GNU partners – the DA, IFP, Freedom Front Plus, UDM, PAC, Patriotic Alliance, Al Jama-ah, Good Party, and Rise Mzansi – is a high-risk move,” said political analyst Dr Sam Koma.
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Koma warned that the ANC’s “Big Brother” approach could alienate GNU allies and ultimately lead to the collapse of the coalition government.
Meanwhile, a task team led by Deputy President Paul Mashatile has been assigned to explore alternative budget solutions, with a report expected by today.
The EFF, despite being approached for support, is unlikely to endorse a VAT hike, which goes against its pro-poor economic policies, Koma added.
He also dismissed the ANC’s claim that zero-rating basic food items would cushion the poor from the VAT increase.
“The cost of living is determined by multiple factors, including food, transport, energy, healthcare, and education. A VAT increase would trigger a domino effect, impacting all these areas,” he explained.
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Economist Prof Jannie Rossouw of Wits Business School noted that the fluid nature of the budget debate meant that “any deal might be possible” in securing votes.
However, he warned that if the ANC struck a deal with the EFF, it could expand the Cabinet further, leading to unnecessary government spending.
Prof Raymond Parsons of North-West University’s Business School called the GNU’s negotiations “a major test of its maturity”, as parties work towards a balanced fiscal approach.
Parsons suggested the government revisit the findings of the 2018 Davis Tax Committee (DTC), which explored ways to mitigate the impact of a VAT increase and alternative revenue sources.
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“The GNU’s best-case scenario would be agreeing on credible measures such as spending cuts and improved tax collection, rather than relying on a VAT hike,” he said.
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