South Africa finance minister to present new budget
South African Finance Minister Enoch Godongwana announced that his office will present a revised budget today, May 21.
The new budget follows nearly three months of turmoil surrounding the budget process and the fragile governing coalition in South Africa. The African National Congress (ANC), which entered into a coalition government with the Democratic Alliance (DA) after failing to secure a majority in last year’s parliamentary elections, proposed a budget in March that included a 1% increase in value-added tax (VAT). Despite protests from the pro-business DA that tax increases would harm growth, the ANC narrowly passed the budget without DA support. The unilateral action caused Finance Minister Enoch Godongwana to express doubts that the DA would remain in the coalition government.
However, after the DA successfully challenged the budget vote in court, and amidst fierce public condemnation of the tax increase, the ANC has withdrawn the proposed VAT hike and returned to the negotiating table with a more conciliatory tone. Minister Godongwana said that the revised budget would only be advanced to Parliament after “thorough consultations.”
The substance of the revised budget will give some indication of whether the DA’s influence within the coalition has increased or decreased because of the budget scandal. In addition to scrapping the VAT hike, the DA has also criticized increases in healthcare spending, and a funding policy which they claim discriminates against Afrikaans-language schools. If those aims are reflected in the new budget, it will be a strong indication that the ANC’s standing within its own coalition is weakening further. It is also possible that the new budget will ignore the DA’s concerns, in which case the DA is highly likely to leave the coalition. In this case, the ANC is likely to pursue a coalition with South Africa’s left-wing parties such as uMkhonto weSizwe (MK) and the Economic Freedom Fighters (EFF). Given both parties’ platforms that call for the nationalization of key industries and rumors of corruption among party leaders, such a coalition would likely provoke strongly negative reactions from international investors and renewed fears of an economic slump in South Africa.
