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South Africa’s budget conundrum: The link between coalition politics and the budget crisis?

11 March 2025 Photo Supplied

Budget Speech Opinion 2025 — Dr Ambrosé du Plessis and Terrance Molobela, Lecturers in the Department of Public Administration and Management, University of the Free State.

Opinion article by Dr Ambrosé du Plessis and Terrance Molobela, lecturers from the Department of Public Administration and Management, University of the Free State.

The mechanistic administrative cog stemming from the sixth administration, through which policy development and implementation took place, has created a false sense of reality regarding the African National Congress (ANC)’s authoritative position in South Africa’s political landscape. The notion that the ANC remains the central political force in the country is increasingly proving to be a fallacy, especially in the face of the changing dynamics within the so-called Government of National Unity (GNU). Even though President Cyril Ramaphosa dutifully signed off on key legislative acts such as the National Health Insurance (NHI), the Basic Education Laws Amendment (BELA), and the Expropriation acts, the ANC, and indeed the broader GNU, have grossly underestimated the complexities of coalition politics.

One of the clearest illustrations of this miscalculation was the latest budget ‘negotiations’, which exposed the growing fractures within the governing coalition. With the budget tabled just two hours before presentation, it became evident that the coalition parties – especially the ANC – are facing a harsh political reality. In a move that has shocked GNU parties, the decision to raise value-added tax (VAT) by 2% has turned into a bone of contention. This cutthroat measure, aimed at generating an additional R58 billion, has sparked fierce opposition from within the very government it seeks to support. The bitter VAT debate has led to a near standstill in the budget process, with some GNU parties staunchly opposing it, while others view it as a necessary evil.

New can of worms

The proposal to raise VAT is indicative of a deeper issue. It is, quite frankly, a regressive measure in an economy already battling a cost-of-living crisis. Raising VAT disproportionately impacts the lower and middle classes, who spend a higher percentage of their income on consumption. This move is naïve at best. VAT might raise substantial sums, but it does little to stimulate the economy or promote productivity, both of which are sorely needed to grow South Africa’s GDP and reverse the country’s economic downturn. At this moment in time, the country cannot afford to further burden a shrinking tax base.

In addition, the VAT conundrum has opened a new can of worms. The Democratic Alliance’s (DA) publicly proposed budget goes beyond the initial 2% VAT increase, challenging the secrecy with which the failed budget was concluded. More importantly, it questions the political and financial ideological foundation on which the initial budget was compiled by the ANC, led by Minister of Finance Enoch Godongwana. There can be no doubt that the DA’s shadow budget, particularly its cost-containment measures, has thrown a spanner in the works of a deep administrative state. At this juncture, the lingering question is – can the true Minister of Finance please step forward? With various proposed budgets from the GNU parties, one can only wonder if the GNU is now officially facing a Pinocchio dilemma. This identity crisis emerged when the ANC indicated that it would now turn to the Economic Freedom Fighters (EFF) – who also opposes the 2% VAT increase – to approve the budget, although the EFF recently rejected the call for negotiations with the ANC and considered it a general discussion. From this stance, it is clear that the coalition game will be played both within and outside the borders of the GNU.

One cannot help but ponder how divergent political ideologies and principles are affecting government expenditure and revenue collection. Gone are the days when the ANC held a dominant, almost unquestionable position in government, able to dictate the terms of the national budget. Today, the ANC's reduced majority has forced it into an awkward position of compromise and negotiation, with the Minister of Finance increasingly serving as a ceremonial figure rather than an authoritative decision-maker. In years past, the State of the Nation Address (SONA) and the subsequent budget speech were seamless events under ANC leadership. But now the budget process has become an all-consuming political battleground, with ideological differences and party interests shaping every decision.

GNU a ‘death sentence’

The ANC's once-solidified grasp on the country's governance is now being tested in ways the party never anticipated. The ruling coalition is no longer a harmonious entity, but a group of political adversaries forced into uneasy alliances for the sake of governance. The impact of this fractured cooperation is glaringly evident in the stalling of critical national decisions such as the budget. What was once a party-centred process where consensus was driven by a unified political party, has now become a multi-party endeavour marked by negotiation, delay, and endless political wrangling.

Reflecting on the experience of the 1996 Government of National Unity led by Nelson Mandela, one sees a stark contrast. Despite hostilities within the tripartite alliance, that government was still able to implement policies and drive the country forward. However, the current GNU coalition partners have yet to demonstrate a similar level of cooperation and trust. In fact, the words of former Deputy President FW de Klerk seem eerily prophetic today. In his 1996 resignation statement, De Klerk described the GNU as a ‘death sentence’ for a meaningful government consensus. He feared that continued participation in the coalition would weaken the National Party’s influence and undermine democratic governance.

In many ways, these words echo the current state of the GNU. The budget process has become a metaphor for a government on the brink of collapse. Consultation among the political parties within the GNU has become a source of paralysis rather than progress. The government’s inability to align itself on critical issues such as the national budget, which totals more than R2 trillion, raises serious questions about its ability to move forward.

The so-called marriage of inconvenience between the coalition partners appears increasingly centred on securing positions rather than creating policies to address the pressing needs of South Africa’s citizens. The budget, a document that should have been a focal point of discussion since the formation of the coalition, has been delayed until the 11th hour. This delay in addressing the country’s fiscal needs points to a broader failure within the GNU. The South African economy, already battered by years of stagnation and underperformance, cannot afford further dithering.

The contemporary GNU, much like the former one in 1996, may have reached its breaking point. The promise of multi-party democracy and consensus-based governance is being undermined by the very factions that have come together in the name of unity. It is hard to escape the conclusion that the continued negotiations around the budget have become a form of political ‘death row’ for the current administration, with no clear path forward. As South Africa teeters on the edge of a political and economic crisis, the time for a new direction, grounded in pragmatism and focused on national interests, has never been more urgent. As South Africa stands at a critical juncture, with the deadline of 12 March 2025 rapidly approaching, the political landscape is poised for a moment of truth. Reports have indicated that the cabinet has reached an agreement on the finality of the budget, but conflicting statements from political leaders, particularly from the DA, suggest that this agreement is not yet a certainty. DA leader John Steenhuisen has publicly declared that no final agreement has been reached and that the parties are still working towards a resolution. For the country, the stakes could not be higher.

This raises significant questions about the future of coalition governance and the state of South Africa's fragile political economy. Several plausible scenarios could unfold, each with distinct consequences for the political stability and economic viability of the nation.

Scenario 1: A unified agreement – A lifeline for the political economy

In the first scenario, we imagine that the cabinet's agreement is genuine, aimed at averting risks to public confidence and the broader market. If the market-driven partners within the GNU recognise the overwhelming importance of a stable budget, they may choose to align their interests. With political stability hanging in the balance, the realisation may set in that South Africa is simply ‘too big to fail.’ This would, in theory, prevent a collapse into chaos, as the GNU partners, acknowledging the nation's susceptibility to political upheaval, would avoid creating conditions for widespread instability.

While this scenario seems like the ideal outcome, history suggests that political cooperation within the GNU has often been fraught with difficulty. The question is whether these partners can truly put national interests before political rivalries.

Scenario 2: The ANC’s secret deal – A recipe for distrust?

Alternatively, there is the possibility that the African National Congress (ANC) has reached a clandestine agreement with the EFF behind the backs of their coalition partners. This scenario would fracture the GNU, erode trust, and create a toxic environment of distrust in coalition governance. If the ANC manages to secure its hold on power, it risks alienating the markets, which would likely lead to a downward economic spiral. The longer this instability persists, the more vulnerable the country will become to a potentially catastrophic collapse in investor confidence.

Scenario 3: DA’s contradiction – The death of coalition unity

In a third possible scenario, the DA contradicts the agreement reached by the cabinet, exposing the extent of disunity within the GNU. This situation would further highlight the lack of trust among coalition partners, and the DA might find itself either paralysed within the coalition, or removed entirely, or even decide to withdraw from the GNU. This shift would trigger an intense debate about South Africa’s continued political economic stability.

South Africa’s economy, already vulnerable to shocks, would find itself in even deeper turmoil if this scenario were to play out. The markets would respond negatively, and the ripple effect would undoubtedly extend to the lives of everyday South Africans.

The real impact on South Africans

Regardless of which scenario unfolds, one thing is certain: the consequences for South Africa’s citizens will be profound. The allocation of funds to government institutions, provinces, and municipalities is likely to be severely affected by any political instability. Without a clear and stable budget, public services will suffer, leading to disruption in the functioning of provincial governments and municipalities. This, in turn, would delay public spending, putting vital services at risk and exacerbating the inequalities, poverty, and unemployment that already plague the country.

News Archive

Qwaqwa Campus opens: Prof. PA Mbati's speech

2005-01-22

Official welcome speech by Prof. PA Mbati for 2005 first year students held on Saturday 22nd January 2005. Program Director, The Chief Director Operations Rev. Kiepi Jaftha, Dean of Students Dr. Natie Luyt, Program Head of the Faculty of Humanities, Dr. Elias Malete, Program Head of Faculty of Natural and Agricultural Sciences, Prof. Riaan Luyt, Acting Program Head of the Faculty of Economics and Management Sciences Prof. Andries Venter, Deputy Director Student Affairs Mr. Teboho Manchu, Coordinator Finance: Mrs. Elizabeth Nchapi, Senior Librarian Mr. Stoffel Kok, Senior Magistrate Mr Saul Mohosho, SRC President Mr. Tello Motloung, members of staff, invited guests, parents, guardians, my dear students, ladies and gentlemen.

It is indeed my pleasure to welcome you to the official welcoming ceremony of the UFS-Qwaqwa Campus 2005 first year students. Our Rector and Vice Chancellor Professor Frederick has requested me to pass to you his warmest wishes and regards on this special occasion. I am confident that the orientation exercise in which you have participated has achieved the desired effect of introducing you to your new way of life here on campus, and that you are now sufficiently prepared to get on with the rigors of being a student at this University.

Following the restructuring of the higher education landscape, the Qwaqwa campus was incorporated into the University of the Free State with effect from January 1 2003 . As a consequence, Management was faced with a whole complex series of challenges including, primarily making the campus financially viable, but also ensuring that it remains relevant in it’s core business as a satellite campus of the University of the Free State in terms of its teaching, learning, research and community service responsibilities.

A whole series of strategic planning workshops were conducted last year with both internal and external stakeholders. Various important strategic objectives were flagged out, and the next level of consultation will take place soon. I know that there is a lot of eagerness, sometimes to the level of impatience to see this process completed as quickly as possible. But again on the other hand, due to the far reaching consequences of any hasty decisions, plus the need for a carefully planned process, we need to be a little more patient before the implementation of the strategic objectives is implemented. You will be kept informed as this important and critical aspect in the evolution of our campus takes place.

As a response to the need for a more effective governance model on the Qwaqwa campus, a review of the governance structure was completed towards the end of 2004 and will soon serve before the Executive of the Executive Management for approval.

Due to the importance that top management attaches to the development of an effective governance on the Qwaqwa campus, the process was facilitated by an internationally acclaimed consultant. Again the contents of the revised governance model will be made known to the campus and the broader community once it is approved.

I am glad to report that in recognition of the need to improve the infrastructure on campus to provide a conducive learning atmosphere to our students, a total of 8.2 million rands was made available towards the end of 2004 for recapitalization of specifically our student residences and lecture venues. The first phase of the residence renovation is completed and residences C, D and E have now been officially handed over to the University by the Contractor. Among the features of the renovated residences is that they will now computer rooms, kitchenettes for cooking, and a redesigned TV room. The rooms have even been fitted with heaters. Our challenge will now be to maintain our newly acquired facilities and to ensure that they do not again deteriorate to an un-acceptable level. The second phase of renovation will start soon.

As indicated in my address during the orientation week, our obligation to you as a campus is to offer you quality training to the best of our ability, and to disseminate this knowledge to you within a conducive atmosphere worthy of good learning. On the other hand, our students have to take advantage of this opportunity to acquire the necessary skills and training in the various academic programs that we offer on campus.

We have a very simple agenda on this campus – our vision is to continuously strive to build and develop the Qwaqwa campus of University of the Free State into a truly quality institution of higher learning in our country. To develop a tradition and culture in which we are proud of who we are, and constantly and tirelessly working towards excellence in our academic programs, and other non-academic but core and important aspects in your growth and development such as sport and community service. To nurture young conscientious citizens who are aware of their duties and responsibilities. Ultimately to produce hard working young people who fully exploit their potentials, and who will serve this country with diligence when unleashed into the real world in effectively managing their roles and responsibilities in society, whether in private or government civil service.

I would like to encourage that the various stake holders of this campus, the students, academic, administrative and support staff, and our broader community, to work together in harmony for the well being of our campus. For this campus to continue to be relevant in the environment that we find ourselves, there is a need for continuous engagement of its various stake holders, and genuinely listening to each other. We must continuously and regularly keep our feelers on alert in order that we can remain relevant.

I am particularly inviting our parents and guardians, the alumni of this campus, and leaders from our community to join hands with us in seeking solutions to the various challenges that we continue to face on campus. I am open for frank and honest discourse on the best way forward for our campus.

The University of the Free State is committed in making tertiary education accessible to as many students as possible. In this regard, students who do not have the required ‘M’ score to gain entry into main stream classes are given an opportunity to study in the highly successful ‘bridging program’ in which learners are integrated with main stream students but with fewer courses to tackle in order to ensure success. This is done on the premise that such students have the potential to pursue a degree course, and that therefore within a well structured program, they can make a success of their lives.

The University is conscious of the fact that in many instances several academically deserving students fail to be admitted into university due to financial reasons. For students who are academically deserving but who because of reasons of poverty cannot pay the requisite fees, the university is able to assist such students through the National Financial Aid Scheme – commonly known as NSFAS, and University Merit Awards. Other incentives such as Sports bursaries are also available.

Please remember that it is important to balance your life on campus and the phrase ‘a healthy mind in a healthy body’ aptly describes this statement. Ensure that you participate in sport and cultural activities of this campus so that you can develop and strengthen the various God-given talents that you have been blessed with.

A second major ingredient for your success on campus is discipline and respect for rules, policies and procedures that govern the University of the Free State , and respect for your fellow students. Good discipline is a major contributory factor to success in life, and more so in your formative academic life at University. This means for example that you must attend all your lectures, complete your assignments on-time and visit the library frequently. Please manage your time wisely and responsibly. Remember that as a university student, you are basically the master and architect of your own destiny.

Think very carefully when you are confronted with difficult situations, be they negative peer pressure, or temptations to indulge in intoxicating drugs, and make the right choice.

The University has well trained personnel including a social worker, a psychologist and counselor, and members of the student affairs division under the leadership of Mr. Teboho Manchu, Deputy Director Student Affairs, who are available to assist whenever you require their help.

Today is also a special day because we have officially inaugurated the SRC President and the rest of the SRC leadership. I am sure that you all join me in congratulating the SRC for being elected to their leadership roles for 2005. Mr. SRC president and your team, please remember that you now have a huge responsibility in carrying out the aspirations of the student body on campus. I want to wish you luck and success as you champion the rights of your constituents, which I believe and trust will be compatible with management’s expectations with regard to quality teaching and learning on campus. As you are aware, Management values the input that the student leadership makes in the operational management of the affairs of this campus, and we look forward to a cordial, non-confrontational working relationship with a view of rendering un-paralleled service on campus.

Mr. Program Director, allow me to wish everyone here a successful and prosperous year. May the good Lord give us the strength and courage to overcome any obstacle that may be placed in our way in the course of our work in 2005.

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