John Steenhuisen flatly told President Cyril Ramaphosa that his caucus would not support tax hikes. (GCIS)
An early morning conference call between President Cyril Ramaphosa and his fellow party leaders in the ruling coalition made clear there was little hope of reaching consensus on the now aborted budget Finance Minister Enoch Godongwana had prepared for delivery a few hours later.
The presidency confirmed that the call took place at 7.30am, and said Ramaphosa facilitated a briefing by Godongwana to party leaders on the key points in the budget.
A source with knowledge of the content of the call said the minister set out the alternative as raising income tax for the highest earning categories, plus possibly hiking company taxes.
But raising VAT from 15% to 17% was the preferable option because it guaranteed raising close to R60 billion to shore up front line services.
This was to be spent on health, education and restoring rail commuter services, with the treasury allocating R19.2 billion to the Passenger Rail Agency of South Africa for critical upgrades and raising the health budget by an average 5.9% over the medium term.
Democratic Alliance (DA) leader John Steenhuisen flatly told the president and finance minister that his caucus would not support tax hikes.
In his customary embargoed briefing to the media about two hours later, Godongwana acknowledged there was every risk that not all parties in the government of national unity (GNU) would support the budget, particularly with local government elections taking place in 2026.
“No one wants to lose their base. The ANC is no different in that regard,” the minister told reporters, adding that for all he knew members of his party might have taken to the streets while he was speaking.
He was alluding to the wholesale leak of the national budget for the first time in as long as anybody could remember.
Duncan Pieterse, the director-general of finance, put it more bluntly and told the media that Business Day had run a story on Wednesday morning accurately setting out what was in the prepared budget.
Sources close to the treasury and other parties in the coalition pointed a finger at DA ministers in cabinet who had been raising alarm about the effect of a VAT increase for a fortnight after Godongwana first mooted the step in a cabinet briefing on 5 February.
But the DA was not alone in opposing a two percentage point hike when Godongwana briefed cabinet shortly before he was due in the National Assembly at 2pm on Wednesday.
“There were some ministers from the ANC who were dead against any form of VAT increase,” said a well-placed source.
With no consensus, Godongwana had to take the unprecedented step of postponing the budget by three weeks, prompting the rand to tumble against the US dollar.
Steenhuisen immediately issued a statement claiming credit for the historic postponement.
He said the DA had “defeated” the VAT increase in a “victory” for South Africans who were spared a regressive measure that would have broken the economy.
He did not elaborate on exactly how it had achieved this goal.
“Today was certainly a historic and unprecedented day in South Africa’s politics. But this is the new politics, the new normal of the government of national unity,” Steenhuisen said in a video statement late on Wednesday.
“We need more jobs, not more taxes. And we said very, very clearly that a budget that contained a 2% VAT increase would not enjoy the support of us and we would not be able to vote for it in parliament.
He said the budget did not speak sufficiently to growth and jobs and was “far too focused on cuts and taxes”. It was the ANC’s fault, and that of Godongwana in particular, for failing to consider carefully the DA’s alternative proposals.
By claiming credit for blocking the budget, Steenhuisen has raised the stakes in the DA’s demands for consultation on every aspect of government policy. Wednesday’s showdown followed just weeks after he threatened to reconsider his party’s place in the GNU after Ramaphosa signed the Expropriation Act, which the DA is now challenging in court.
He said the postponement of the budget was a sign of a “healthy democracy” and “a very clear indication that no one party now has the ability just to bulldoze anything it wants” through parliament.
“It’s going to require the collective efforts of all parties in the government of national unity to make budgets, other things work going forward.”
Steenhuisen found support from Good party secretary general Brett Herron, who said in a social media post that delaying the budget was not an existential crisis but the fault of the treasury for “failing to consult the GNU parties and acting like it is business as usual”.
Ramaphosa issued a statement assuring the country that ongoing cabinet deliberations would result in a budget protecting the poor and laying a platform for economic growth.
He characterised the postponement as the result of disagreement but also “collegial and mature consensus within cabinet that budget proposals be worked through comprehensively and productively” in the interest of individual wellbeing and investment.
“The government of national unity will, in the coming days and weeks, intensify our efforts to balance the imperatives that drive the fundamental growth objectives of this administration with the realities of a constrained fiscal environment,” he said.
“We are working as partners to ensure that the budget is one that works for individuals and investors alike.”
Coalition parties are expected to discuss the budget in a meeting of the clearing house next week.
DA spokesperson Willie Aucamp vigorously denied that the party had leaked the budget to the media.
“The DA definitely denies it … I think there’s such a lot of speculation regarding this,” he said.
“With these things, you most probably will never know the true facts. But I think the moment that you have got your commissioner of Sars [South African Revenue Service] coming and saying in public that he does not think that there should be a hike in taxes then people will start to ask questions.”
“It’s very difficult to keep something like this under the carpet if there’s a lot of people working with it, but the Democratic Alliance respected the closeness of the cabinet meetings.”