1st GNU Budget Speech is postponed to 12 March, DA slams proposed VAT increase
- In an unprecedented move, the Minister of Finance Enoch Godongwana postponed the first Government of National Unity's budget speech
- The speech was supposed to be delivered on 19 February 2025 but it was postponed to 12 March allegedly because an agreement between GNU parties could not be reached
- The differences were from different parties including according to Presidency Minister Khumbudzo Ntshavheni, who clarified that the difference was not from the Democratic Alliance opposing a proposed 2% VAT hike
- Briefly News spoke to Dr Kenneth Creamer, School of Economics and Finance, University of the Witwatersrand about the VAT hike
With over seven years at Daily Sun and Vutivi Business News, Tebogo Mokwena, a Briefly News current affairs journalist, offered insights into South African politics, national, provincial and local governance, the Government of National Unity, political parties and Parliament.
Source: Getty Images
CAPE TOWN — The Government of National Unity's (GNU) first budget speech since its formation was postponed to 12 March 2025 after parties within the coalition government could not agree on the budget speech. The Democratic Alliance claimed that the disagreement was over a proposed tax increase.
When was the budget speech supposed to be held?
The budget speech was scheduled to be delivered on 19 February, which would have been the first budget since the Government of National Unity was formed after no political party won a majority in the 2024 general elections. In a press briefing by the cabinet members, the minister of the presidency Khumbudzo Ntshavheni clarified that ministers in the cabinet from across the GNU did not agree on certain aspects of the budget.
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What did the Democratic Alliance say?
However, the Democratic Alliance, another party in the Government of National Unity, said on its @Our_DA X account that the speech was postponed because it rejected a proposed 2% Value-Added Tax (VAT) increase.
Political parties in South Africa formed a Government of National Unity, the first coalition since the 1994 coalition government that was formed after the first democratic elections. The Democratic Alliance, the Inkatha Freedom Party and other parties set their differences aside and agreed to govern the country together.
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Read the X tweet here:
Economist speaks to Briefly News
Briefly News spoke to Dr Kenneth Creamer, School of Economics and Finance, University of the Witwatersrand, who weighed in on the implications of an increase in VAT.
"There is no doubt that a VAT increase would lead to unwelcomed price increases, except on key zero-rated items like basic foodstuffs and fuel. South Africa’s heavily constrained fiscal situation and increasing spending demands have made it likely that taxes will have to be raised, or spending cut if we are to avoid the dangers of a debt trap, in which more and more resources have to be used to pay off our national debt.
"The only way out of our economic problems is for South Africa is to get growth and jobs going by improving the country’s investment environment. Fiscal sustainability is a necessary part of creating a positive investment environment for both public and private investment, together with effective industrial and trade policies and improved performance of the country’s energy and logistical systems.
Over the next few weeks, the GNU is going to have to show a high degree of maturity and good sense in order to make the trade-offs needed to put South Africa onto a higher growth and jobs path.
Macroeconomics theory talks about the tendency of political systems towards ‘fiscal deficit bias’, as politicians prefer to increase spending and lower taxes even when economic conditions do not warrant it. A key question at this critical moment is whether South Africa’s GNU and broader civil society will be able to show the kind of leadership and economic sense required to overcome the current impasse in a manner that sets the economy up for a new wave of growth and job creation," he said.
What you need to know about the GNU
- The African National Congress and the Democratic Alliance reached an agreement to form a Government of National Unity on 14 June after intense negotiations
- Five days later, President Cyril Ramaphosa was sworn in as the president of the Government of National Unity
- Ramaphosa hailed the Government of National Unity as the country's second miracle during a keynote address on Heritage Day
- However, ActionSA slammed the coalition government 100 days after its formation and accused it of not delivering
- Cracks within the GNU started showing and the DA warned it could collapse when Basic Minister Siviwe Gwarube's position was jeopardised after she refused to attend the signing of the Basic Education Laws Amendment Act
What SA said about the postponement
Netizens were disappointed in the postponement and many weighed in on the rejected 2% VAT. They largely agreed that VAT should not be increased, while others disagreed.
ND TSHITHAVHANANI said:
"As an ANC voter, I want economic growth, not tax increases. Let's cut our expenditure and bureaucracy. I fully support the DA here."
PixelPhantom said:
"The bloated government spend needs to be cut considerably."
Cebo Hlophe said:
"I'm an ANC voter but I support your stance on this one. We should be getting a reduction and not an increase."
Muller said:
"I barely make it through a month as things are. This will be the final nail in my and many other South Africans' coffins."
Buffel said:
"As long as they don't increase business tax and personal income tax."
Gwede Mantashe says no political party can collapse GNU
In a related article, Briefly News reported that the ANC's chairperson Gwede Mantashe snubbed the Democratic Alliance's claims that the GNU would collapse if it pulled out. Mantashe said the GNU cannot be collapsed by a single party.
Mantashe spoke in December after DA's Helen Zille said a GNU coalition between the Economic Freedom Fighters, MK Party and the ANC would collapse. He said that the DA pulling out would create space for other parties to join the GNU.
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Source: Briefly News
