GNU Leaders Finally Reach Budget Agreement After Tense Negotiations

JOHANNESBURG – A meeting held on Thursday evening between the leaders of the political parties in the Government of National Unity (GNU) may have finally broken the deadlock preventing the passage of the national budget. Sources indicate that the budget could now be approved later this month, at the third attempt.

Convened by President Cyril Ramaphosa ahead of Finance Minister Enoch Godongwana's third budget presentation, the Johannesburg meeting appears to have yielded positive results, with parties reaching an agreement on previously contentious issues.

Insiders speaking to City Press revealed that the leaders left the meeting with "somewhat a smile" on their faces, as all parties had agreed to support the budget when it is tabled on 21 May. Crucially, the Democratic Alliance (DA), which had opposed the previous two budgets, has now come on board.

The DA's support for the fiscal framework is contingent on the withdrawal of a proposed VAT increase. The party also cited that the withdrawal of the VAT increase was made an order of the court. Last month, the DA and the Economic Freedom Fighters (EFF) jointly approached the Western Cape High Court to challenge Parliament's decision to pass the fiscal framework with a 0.5 percentage point VAT increase.

One source explained that even though the DA was not entirely satisfied with all items on its list of demands, the party ultimately decided against "holding the country to ransom" by rejecting the budget once again.

"Unless the ANC and other parties decided to go against what was discussed on Thursday, mainly the VAT increase, then the DA will oppose it," the source cautioned.

Another source, also privy to the meeting, confirmed that the DA had agreed to support the budget despite not having all of its demands met.

"Even the clearing house and the referral committee have not had issues to deal with lately," the source added, indicating a smoother process in recent weeks. "We haven’t had any serious issues for the referral committee [to deal with]."

This meeting marks the first scheduled consultation aimed at resolving the impasse that has led to the fiscal framework being rejected twice already.

Godongwana's initial attempt to deliver the budget speech on 19 February was cancelled just hours before he was due to give his address. This followed several GNU partners indicating at a Cabinet meeting that morning that they would not support Godongwana's proposed VAT hike.

Despite warnings from the DA – the second largest partner in the GNU – that it would not support the VAT increase, Godongwana initially attempted to push through the budget.

On 12 March, the minister finally delivered his budget speech, proposing a VAT increase of 50 basis points this year and a further 50 basis points the following year. This proposal was also rejected by the DA and another GNU partner, the Freedom Front Plus.

However, Godongwana managed to get the fiscal framework passed on 2 April, thanks to the support of Herman Mashaba's ActionSA and Mmusi Maimane's Build One SA, neither of which are part of the GNU.

As part of the consultative processes and engagement with other political parties, City Press understands that Godongwana will meet with all the GNU partners before his 21 May budget speech.

The road to this potential agreement has been fraught with tension. Two weeks ago, City Press reported that the African National Congress (ANC) had accused the DA of using the VAT hike issue to advance its own political agenda.

ANC chief whip in Parliament, Mdumiseni Ntuli, stated that the DA's genuine concern was not the VAT hike itself, but rather using the contentious issue to score cheap political points.

Ntuli claimed that the DA had broader issues within the GNU, including the Basic Education Laws Amendment (Bela) Act and the National Health Insurance (NHI) Act. He also alleged that the DA was unhappy that its member and Deputy Minister of Finance Ashor Sarupen had not been allocated more responsibilities and powers.

"If they had succeeded in negotiating their way on the issues relating to the budget, they wouldn’t have gone to court. If you look at that budget, there is money that is allocated to early childhood development centres, which is part of the implementation of the Bela Act, by the way. There is money allocated to the NHI to start that budget," said Mdumiseni Ntuli.

Despite being GNU partners, the ANC and the DA have been at loggerheads on several issues, including a concession on private contractors to run the ports in Durban and Cape Town, and giving municipalities more control over the rail system by year end. The DA has also been pushing for expenditure reprioritisation, accelerated debt repayments, increased funding for infrastructure, and tax relief for low-income earners.