Fikile Mbalula warns of economic turmoil amid historic Budget postponement and VAT concerns

7 Mar 2025

ANC Secretary-General Fikile Mbalula says mechanisms to resolve differences in the GNU are ‘probably not sufficient’.

ANC Secretary-General Fikile Mbalula has expressed concern over the recent unprecedented postponement of the Budget, the first in South Africa’s history, saying: “Everyone should be worried about the Budget, about the performance of the economy. We are in uncharted waters.”

He made the remarks while in conversation with Sizwe Mpofu-Walsh on Thursday night, discussing the ANC’s shifting power dynamics and its role in South Africa’s evolving political landscape, hosted by the Friedrich-Naumann-Foundation’s Freedom Dialogue in Parktown, Johannesburg.

If the Budget had passed last month, VAT would have increased from 15% to 17%, further burdening an already struggling nation. With high unemployment, soaring food prices and rising electricity costs, many South Africans are already facing immense hardship.

Read more: What a 2 percentage point VAT increase would actually cost SA households

The Sunday Times recently reported that the National Treasury was now proposing a 0.75 percentage point increase in VAT, with the backing of the ANC.

Speaking about the Budget now scheduled for Wednesday, 12 March 2025, Mbalula said he was very optimistic it would pass. However, he warned: “It might be a Budget that not all of us agree with, but there will be a Budget.”

Probed further, Mbalula said that while he didn’t want to position himself as an economist, he acknowledged the country’s strained fiscal situation.

“What I know is that our economy is not performing well and that our borrowing capacity is exhausted,” he said.

Regarding the ANC’s stance on VAT, Mbalula said, “All essentials must be zero rated”.

In January, the ANC’s National Executive Committee (NEC), at a three-day Lekgotla, considered proposals such as implementing a fuel price cap, VAT exemptions on electricity, and expanding the list of zero-rated food items to include essential, nutritious products, Daily Maverick reported.

Read more: Water security, economy and fragile GNU under spotlight at ANC indaba

GNU options

The inability to table the Budget is one of many incidents that have highlighted significant fractures within the fragile 10-party Government of National Unity (GNU), which is still divided over several pieces of legislation, including the NHI Act, Bela Act and Expropriation Act.

Mbalula was asked if the party had been prepared for such an eventuality.

“There are no fixed answers on this, but we are committed to the GNU, we don’t want anyone to leave.”

Despite continuous struggles to resolve tensions, Mbalula admitted that the conflict resolution mechanism currently in place may be falling short.

“We have created mechanisms, probably they are not sufficient should there be difference on how we settle them in the context of the GNU. This is uncharted waters. What we know about the GNU is only in 1994 that the national party at some point walked out but the GNU stayed the course”.

Read more: How the ANC’s GNU partners revolted after hearing of VAT increase at 11th hour

Should the arrangement eventually collapse, Mbalula said there were options on the table that included a minority government or a grand coalition.

ANC reconfiguration

Thursday’s discussion came two weeks after the party’s national leadership decided to reconfigure its provincial structures in Gauteng and KwaZulu-Natal following a setback in the 2024 general elections, a move seen as unprecedented.

Mbalula was quick to acknowledge that in the past, such a decision would have been contested, with people taking to the streets or even to court. However, this had not been the case so far, he said.

“There was no pushback. The structures are not happy in terms of the state of the party. Everyone is on the ground, rolling up their sleeves and realising that this thing called power is not a given; it can go away,” he said.

Mbalula said his colleagues had got to a point where they understood that “people are not voting like cattle. They can change their minds and withdraw their vote,” and as result, there was a “preoccupation that the ANC must fix itself”.

Read more: Morally malleable Jeff Radebe has impossible task for ANC in KZN

The ANC is facing both an electoral decline and a succession debate as President Cyril Ramaphosa’s term ends, which is crucial for the party’s future.

Mbalula said that while the debate was important, the party had decided not to address it at this time, choosing instead to wait until after the 2026 local government elections, which it intended to use as an opportunity to regain lost ground.

“We said it’s an easy discussion, but you can’t pursue your membership in that direction when you are a 40% party, because we will be discussing the next leader of the ANC after 2026 when we are probably a 30% party. You need to discuss that question when you have shown that you are on a path of recovery.

“We have agreed that we will prepare for that discussion so that there are no surprises. We might as well arrive at that discussion and conclude that we don’t need a contest because it is going to turn against each other politically — there’s no need, because we have recovered so much from the 40%. We need to consolidate going forward,” Mbalula said. DM

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