DA federal executive chair Helen Zille is not known for pulling her punches. But even she was reluctant to declare last rites over the government of national unity (GNU) when asked about it on the steps of the high court, where she lodged papers against the ANC.
“Whatever decision we take will have profound implications for South Africa and for our economy, so we’re not rushing into anything,” she said, with remarkable restraint. “We are going to consider all the options, look at all the consequences and try to predict all the unintended consequences and then make a rational decision.”
At this point, divorce looks somewhat inevitable, even if you simply look at the optics of the DA going to court to review an ANC-led parliamentary vote to pass the budget. It’s not often you’ll sue your spouse, then expect to chat amiably in the kitchen later.
But Zille isn’t wrong. None of the ANC top brass seem to realise it, but a DA withdrawal from the government would devastate the economy.
Bank of America (BofA) now expects S&P Global Ratings to cut its outlook on South Africa’s credit rating from positive to stable, as the cloud over the GNU, global uncertainty over Donald Trump’s tariffs and delayed reform cause slower economic growth.
This is a major missed opportunity, as any upgrade from S&P would have indicated to foreign investors that the government was on the right track.
BofA, the world’s second-largest bank, also downgraded its estimates of South Africa’s economic growth to 1.4%, from an earlier forecast of 1.6%. This is more about the “politics of the budget rather than the fiscal metrics”, said Tatonga Rusike, an economist at BofA.
But while Zille is staying cool, it’s not as if everyone else has been reluctant to declare the GNU – at least as it was constituted in 2024 – dead.
One senior leader in the DA says he felt it was “done and dusted” after the ANC bypassed its coalition partner, harrowingly winning approval for a much-hated budget that seeks to impose a VAT hike from 15% to 16% over the next two years.
That the ANC was able to do this was thanks only to kingmaker Herman Mashaba, who wielded ActionSA’s tiny 1.2% of the national vote as if it were 10 times that in negotiations with the largest party over the weekend.
As a result, ActionSA voted in favour of the budget alongside others in the coalition – including Rise Mzansi, the IFP and the Patriotic Alliance, but excluding the DA – on condition that finance minister Enoch Godongwana comes back to parliament before May and presents a new budget without any VAT increase.
It seems anomalous: approve this budget with a VAT hike, on condition there is a new budget without one. But it hinges largely on trust – the fact is, the DA didn’t trust the ANC to come back before May with a new budget, whereas ActionSA took this gamble.
As Mashaba tells Currency: “Our proposal is clear. The finance minister has to come back to parliament with a new budget before May 1 that contains no VAT hike.”
This sets the stage for ActionSA to be ushered into the coalition – a U-turn from its position last July, when it rejected that offer.
“Last month, the ANC started engaging us because they weren’t reaching agreement with the DA. And we said that we will talk to the ANC about being part of the GNU, provided there is no VAT hike,” he says.
The upshot was there for all to see in parliament on Wednesday: ActionSA’s six votes were the swing factor in favour of passing the budget, 194 votes to 182.
Reshuffle loading
Perhaps the most important thing Mashaba said, which has been overlooked, is that he reckons that under the deal, the ANC agreed to certain conditions: first, that the bloated cabinet must be shrunk and, second, that Ramaphosa has to reconstitute his cabinet.
“The ANC has agreed with us, because there cannot be a cabinet of ministers who did not support this budget,” he says.
If Mashaba is right, this implies Ramaphosa will soon reshuffle his cabinet, potentially ousting the DA ministers, including agriculture minister John Steenhuisen, communications minister Solly Malatsi, home affairs minister Leon Schreiber and public works minister Dean Macpherson.
If so, the message from the other parties is: don’t let the door hit you on the way out.
ANC chair Gwede Mantashe said his party was psychologically ready for the DA to quit the coalition, while Gayton McKenzie, the fiery leader of the Patriotic Alliance, told DA leader John Steenhuisen to “file your resignation papers”.
But if the DA walks, will the coalition succeed with other partners?
Iraj Abedian, the founder and CEO of Pan-African Investment and Research Services, doesn’t believe so.
This is no longer about the budget, or even a VAT increase, Abedian says, “it is about the stability of the coalition government – the DA and ANC are playing a game of chicken; who will blink first?”
The DA was always a hard sell to the ANC’s electorate, but it was as a necessary collaborator; now that the ANC has pushed through a budget without the DA, the utility of the partnership is very much up for debate.
“It’s really unfortunate because at the time that the entire political machinery – both opposition, right, left, centre and the middle – needs to focus on the national interest to come to acceptable terms with the US, they are spending their time fighting and taking each other to court and all of that, which is highly against the national interest.”
Abedian says the budget Godongwana tabled – which was passed by the ANC, IFP and ActionSA – is “not realistic”, as the debt fails to include the soaring liabilities from municipalities.
An indication of this lack of realism is the fact that the government is still predicting GDP growth will accelerate to 1.9% this year from 0.6% in 2024, even though everyone else has cut back their projections.
He says the DA was right to protest that this budget doesn’t cut the mustard.
“There’s nothing in the budget that changes the drivers of economic growth,” he says. And worst of all, there’s no aptitude in the halls of power to question any of this.
Fingers in the pie
So did the DA overplay its hand? ActionSA’s Athol Trollip believes so, arguing that it tried to use the budget standoff as a negotiating tool to push through other economic reforms, which were really the domain of the wider government.
Zille concedes that her party was pushing for a wider economic package, which included a spending overhaul and changes to the Expropriation Act, as well as cutting any tax hikes from the budget.
“It was about both, because we are here to get the ANC to share power, most crucially on an economic plan to save South Africa,” she says. Simply settling for a budget that removed a VAT hike “doesn’t go nearly far enough in getting an economic plan on the table that will grow the economy and create jobs”.
Azar Jammine, chief economist at Econometrix, believes the DA was entirely right to draw a line in the sand on tax hikes.
“The budget supposedly committed to increased investment. But why they had to raise taxes beats me, when they could have actually managed to cut wastage and limit increases to public sector wages,” he says.
Lumbering the public with extra tax is not the elixir for growth, he says. And that is why the rand is weakening, because of the signal that such a move sends to the markets about how growth has been deprioritised in favour of spending. That, and thwarted expectations.
“There’s clearly growing frustration and a realisation that the economy isn’t growing. We’ve had no load-shedding for over a year, and despite that, there’s been very little positive impact on the economy,” Jamine says.
The deeper problem is the lack of investment – despite all the promises of the fabulous new coalition, capital investment actually fell by 3.7% last year. That, needless to say, is a massive fall at a time when investment should be going the other way.
“There is obviously a distinct lack of willingness to tackle the real problem, which is excessive and wasteful expenditure,” he says. “One speculates as to whether this is because many of them have their own fingers in the pie.”
That may seem too cynical, but if any moment has reinforced the view that politicians are motivated entirely by self-interest, the past week, with the unravelling of the grand coalition, has demonstrated that in technicolour.
Top image: Herman Mashaba (Gallo Images/City Press/Tebogo Letsie) and Rawpixel/Currency collage.
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