DA leaders to meet following defeat over budget

The DA leadership is expected to meet in the coming days to craft a way forward following a bruising defeat on the proposed budget.

The DA has incurred multiple losses on key policy issues with some of its leaders questioning whether it should remain in the Government of National Unity (GNU).

It lost the battle against the National Treasury's proposal for a VAT increase to plug the country's R60bn revenue shortfall. 

DA leader John Steenhuisen has been under pressure to deliver results for the party as some of its leaders continue to question the relevance of remaining in the GNU. 

In January the DA’s decision to remain in the GNU came under scrutiny during a federal council meeting. 

The Sunday Times reported that the group lost a fight to have its GNU ministers report to its federal structures, calling into question what the party gained from the GNU as it continued to be undermined by the ANC on policy issues such as the Bela and Expropriation Act, among others.

No minister of finance is ever happy to increase taxes. We are aware of the fact that a lower overall burden of tax can help to increase investment and job creation and also unlock household spending power.

—  Enoch Godongwana, finance minister

The DA is said to have put up a spirited fight during the cabinet meeting just hours before  finance minister Enoch Godongwana was scheduled to table the budget. 

Insiders said the budget, which included a VAT hike, has further strained the relationship between the ANC and the DA. 

Insiders privy to the meeting said Steenhuisen insisted its manifesto was not represented in the budget presented by Godongwana during the cabinet meeting. 

They said discussions were so heated that President Cyril Ramaphosa insisted that all cabinet members make submissions. 

The insiders said the DA had threatened to walk out of parliament should the budget include a tax hike. 

As a contingency plan to prevent other political parties joining the DA’s possible walk-out, insiders said the ANC negotiated with some of the big political parties not to join the DA. 

Steenhuisen denied any threats were made, telling TimesLIVE Premium there were no counter-proposals, and the party's ministers had previously provided the ANC with a compromise solution.

Godongwana delivered the budget following the heated discussion proposing to increase the VAT rate by half-a-percentage point in 2025/26, and by another half-a-percentage point the following year, bringing the VAT rate to 16% in 2026/27. 

The government also proposes no inflationary adjustments to personal income tax brackets, rebates and medical tax credits. 

Godongwana said the proposed measures will raise R28bn in additional revenue in 2025/26 and R14.5bn in 2026/27. 

He said the decision to increase VAT was not taken lightly. 

“No minister of finance is ever happy to increase taxes. We are aware of the fact that a lower overall burden of tax can help to increase investment and job creation and also unlock household spending power,” he said. 

A DA leader said it proposed during cabinet that its principal was no VAT increase, adding that the revenue shortfall could be plugged through several growth initiatives including the concession of the ports in Richards Bay and Cape Town. They said the DA also proposed a spending review in government and cutting off unproductive government programmes. 

“We were saying there are growth initiatives that if they were done would make it perhaps acceptable for a 0.5 (percentage point) increase in VAT, but in the absence of those things how do you expect us to accept a 0.5 percentage point increase when a key part of our election manifesto revolved around no new taxes,” the DA leader said. 

The DA leader said the ANC had not conceded anything of substance towards the policies of their GNU partners. 

Asked if the DA would consider walking out of the GNU, the insider said: “We will cross that bridge when we get to it.”

One ANC cabinet leader argued that several concessions were made in the budget to include proposals made by the DA.  

“It's disingenuous of the DA to claim they are underrepresented in the budget. They got the spending review, the concessions on ports are in the works, and the rail transfer for Cape Town is in the works. The reforms the DA is crying about were already in process during the sixth administration, what needs to happen is for us to build on it and they are refusing to accept that.”

The cabinet member said another point of departure during the cabinet meeting was a proposal by the DA for a fuel levy increase. 

“We can't do that. If you look at the studies they point to South Africans paying a considerable amount for public transport. Until the system is fixed, you can't continue to burden low-income motorists and the poor. RAF (Road Accident Fund) for instance was not included to consider the issues around transportation.”

One high-ranking ANC leader, however, said the party must be pragmatic in its approach to the DA, adding that some concessions will have to be made in the lead up to voting on the budget. 

They said while the DA was a “needed nuisance”, it was important to the make-up of the GNU. 

They said Ramaphosa will have to make some concessions on some of the DA's demands, and that Steenhuisen was important for a stable GNU. 

“It's reasonable to work with John as opposed to working with Helen [Zille]. So it therefore stands to reason that if Helen replaces John with someone else, the replacement might be hostile to us. We have to consider their congress next year and maybe out of frustration they might hold congress early, but I don't think their support base is convinced they must pull out. 

“What they are likely to say is that if you were not there, the VAT would have been 2% or the MK Party and the EFF would have pushed the ANC to a corporate tax. That there was no appetite to increase corporate tax was because you are there.”