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

By Yeshiel Panchia and Nonkululeko Njilo

19 Feb 2025

The failure to present the country’s Budget has exposed deepening divisions within the fragile Government of National Unity, with the ANC appearing to believe it still had the upper hand after informing coalition partners about the VAT hike at the last minute.

Political parties in the Government of National Unity (GNU) were livid after a surprise two percentage point VAT increase was imposed on them hours before Finance Minister Enoch Godongwana was set to deliver the budget speech, resulting in an unprecedented and historic postponement – the first since 1994.

If the Budget had passed, 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. This tax hike would have hit particularly hard, especially for the 30 million people still living below the poverty line.

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

Daily Maverick has since established, through both interviews with highly placed GNU party insiders who did not want to be named, as well as media statements, that Godongwana had presented the two percentage point VAT increase to GNU partners only on Wednesday morning, resulting in the stalling of the proposed Budget.

GNU partners claim victory

John Steenhuisen, leader of the DA, the biggest GNU partner after the ANC, declared the Budget postponement a victory against the VAT increase, stating in a media release, “The postponement of the Minister of Finance’s 2025/26 National Budget Speech today is a victory for the people of South Africa, as it prevents the implementation of a [2 percentage point] VAT increase that would have broken the back of our economy.”

Wouter Wessels, FF Plus MP and the party’s spokesperson on finance, said his party had shown it would not be bullied, firmly standing its ground against the proposed hike after being kept in the dark about its details.

“It was only this morning that there was an attempt to take us into confidence, and that is exactly the problem. The fact of the matter is, if we did not have a multiparty government, tonight would have been a very sad evening where people would have been subjected to a [2 percentage point] tax increase,” he said.

The UDM’s deputy president and leader in parliament, Nqabayomzi Kwankwa, dismissed claims that his party had missed the sitting at which the proposal was made.

“Any suggestion that UDM was unavailable for a meeting is entirely false. It seems that some parties are still under the illusion that they alone govern the country.”

Like most GNU partners, the UDM was also opposed to the hike.

“This decision, which carries serious implications for the country’s economic future, cannot be simply made behind closed doors on the morning of the sitting,” Kwankwa said.

Read more: Ramaphosa’s big global week dimmed by Budget shambles

In a press briefing held after the postponement of the speech, Godongwana and Minister in the Presidency Khumbudzo Ntshavheni, both from the ANC, were at pains to promote a united front, stating that members of Cabinet worked on behalf of the good of South Africans and not for their own political party goals.

The ANC’s GNU partners, however, agreed that the impasse could have been avoided if the party had consulted them in advance, especially considering that, in the 2024 general elections, the ANC lost its parliamentary majority for the first time since 1994, securing just over 40% of the vote.

The GNU was formed to promote unified governance and drive economic reforms. However, aligning the differing political agendas of coalition partners has proven to be a major challenge, as highlighted by the Budget dispute.

Trouble in paradise

Godongwana confirmed during his press briefing that at a Cabinet meeting on 5 February 2025, it was clearly highlighted that a VAT increase was on the cards, stating, “We presented in Cabinet. This is the direction we are likely to take. We didn’t put the amount then.”

By how much VAT would increase, it seems, was the point of contention.

Multiple GNU coalition party members confirmed to Daily Maverick anonymously that a major point of contention was that the exact VAT increase was not noted in previous meetings and that discussions around the VAT increase centred on a 1 percentage point increase.

Two Democratic Alliance (DA) insiders confirmed that the party was only notified of the 2 percentage point increase on Wednesday morning, the day of the Budget presentation.

Similar confirmations came from both the IFP and Rise Mzansi, with sources confirming strenuous internal discussions as to how the parties should respond.

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

Fallout and response

The Inkatha Freedom Party (IFP) echoed similar concerns in an official statement: “As a party committed to responsible governance and economic justice, the IFP does not support a proposed [2 percentage point] increase in VAT. This position was strongly conveyed in Cabinet today,” said national spokesperson and MP, Mkhuleko Hlengwa.

The Patriotic Alliance (PA) expressed support for the postponement, with leader Gayton McKenzie saying, “We commend the decision to delay the Budget. It’s imperative that we prioritise the needs of our people over hasty fiscal measures.”

Al Jama-ah MP Shameemah Salie acknowledged the delay’s impact, but argued that it allowed for a more inclusive fiscal approach: “The proposed VAT increase would have placed an undue burden on our communities. This delay allows for a more considerate approach.”

ANC’s isolation

While the DA and other GNU members claimed victory, there was a general feeling that they had been surprised by the two percentage point VAT increase and betrayed by the Treasury and Godongwana – and by extension – the ANC.

Godongwana’s proposed VAT hike clearly reflects his party’s agenda, which was debated by the ANC’s top decision-making body, the National Executive Committee (NEC), on 26 January at its three-day Lekgotla. The NEC put forward bold proposals, including regulatory actions such as 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

Godongwana took jabs at his GNU partners after his Budget was delayed: “The Freedom Front Plus is not telling the truth. Those in the DA, they are always having an identity crisis.”

Ntshavheni, however, promoted the idea that the deadlock was a result of the democratic process and a mere speedbump as a result of Cabinet members fulfilling their constitutional duty.

Director-General of the Treasury Duncan Pieterse fielded technical questions regarding the budgetary procedure, as well as how the investor roadshow – domestic and international – would proceed, but stayed well clear of any politically sensitive answers regarding the conflict in the GNU, clearly discomfited by the situation he finds himself in.

With the Budget now postponed to 12 March 2025, coalition partners have less than a month to resolve their differences. The question remains whether the GNU can withstand the political strain and reach a consensus or whether this crisis will mark the first major fracture in an already tenuous alliance. DM

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GNU partners claim victory

Trouble in paradise

ANC’s isolation