South African Budget battle: ANC's VAT proposal faces multi-party opposition.
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The African National Congress (ANC) is facing significant criticism for its insistence on increasing Value-Added Tax (VAT), a move that political analysts warn could have both political and economic repercussions, particularly as poverty levels rise among black South Africans.
With Parliament set to vote on the ANC's budget proposal in less than two months, the party is seeking support from the Economic Freedom Fighters (EFF) and the uMkhonto weSizwe Party (MKP). However, experts caution that this strategy may be misguided.
This follows the rejection of the proposed VAT increase for 2025 by several political parties, including the major players in Parliament. Finance Minister Enoch Godongwana tabled a revised budget on March 12, which was rejected by most significant parliamentary parties despite reducing the proposed VAT hike from two percentage points to one, spread over two years.
Historically, the ANC has enjoyed dominance in Parliament, where its budget proposals have encountered little substantial opposition. However, the political landscape has shifted recently, especially after the ANC was compelled to co-govern with other parties, including the Democratic Alliance (DA).
Dr. Metji Makgoba, an independent political analyst and senior lecturer at the University of Limpopo, highlighted the potential ramifications of the ANC's approach.
“If the EFF and MKP decide to enter discussions with the ANC but fail to oppose the VAT hike, they too risk severe political consequences,” he warned.
“Both parties have built their platforms on advocating for economic justice and supporting the interests of the poor. Supporting a tax increase disproportionately affecting their constituencies could undermine their credibility and erode their support base.”
Makgoba noted that the ANC has historically positioned itself as a pro-poor party, but its current push for a VAT increase suggests a troubling departure from that commitment.
“By advocating for a tax increase that disproportionately impacts the working class and lower-income groups, the ANC risks alienating its core voter base and undermining its legitimacy,” he explained.
In stark contrast, the DA has opposed the VAT increase, placing the ANC in a difficult situation. “The DA’s stance exposes contradictions within the ANC’s economic policies, forcing the ruling party into a defensive posture,” Makgoba stated.
“This alignment with right-wing economic ideologies could weaken the ANC’s standing among working-class voters. By adopting a populist stance against the VAT increase, the DA positions itself as more responsive to the economic challenges faced by ordinary South Africans, despite its broader neoliberal policy framework.”
Makgoba argued that this debate transcends mere economic policy, serving as a test of political strategy and ideological consistency. He cautioned that if the EFF and MKP prioritise pragmatism over principle, they may struggle to justify their decisions to their supporters.
“Ultimately, how the ANC navigates this contentious issue will have significant ramifications,” he said. “If the party continues to advocate for the VAT increase despite widespread opposition, it risks deepening public disillusionment and accelerating its decline in electoral support.”
According to Makgoba, the DA could successfully brand itself as the defender of ordinary South Africans, potentially shifting voter sentiment in unexpected directions.
As the budget vote approaches, all eyes will be on the ANC and its political rivals. The outcome of this debate has the potential to reshape party alliances and redefine the political landscape in South Africa for years to come.
Themba Godi, former chair of the Standing Committee on Public Accounts (Scopa) and leader of the African People's Convention (APC) commented on the budget debacle, stating that it underscores the current coalition's lack of agreements on fundamental issues.
“It shows the ANC has no option because the DA is digging in and making political demands,” Godi noted. “The ANC is therefore forced to look at those parties it knows are pro-black and can reach agreements with.”
He added, “This situation opens the door for possible future consideration of alternatives to the current coalition arrangement, where the ANC might find a more stable partnership with black parties rather than being beholden to the DA's political decisions within the coalition.”
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