BUDGET TURMOIL SPARKS COALITION CRISIS IN SOUTH AFRICA

Thu 10 April 2025:

As tensions mount over South Africa’s 2025 national budget, the country’s fragile coalition government—dubbed the Government of National Unity (GNU)—is teetering on the brink of collapse, with the word “budget” now at the center of a political storm threatening to reshape the nation’s governance.

On 2 April, the African National Congress (ANC), alongside smaller parties like ActionSA and Build One South Africa, managed to pass a controversial fiscal framework that included a 0.5% VAT increase. The Democratic Alliance (DA), the second-largest party in the coalition, voted against the proposal, aligning with opposition parties such as the Economic Freedom Fighters (EFF) and Freedom Front Plus (FF+). This has triggered a wave of political fallout.

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Who’s Involved?

The ANC, led by President Cyril Ramaphosa, is now navigating deep divisions within the coalition. DA leader John Steenhuisen insists the party remains committed to the coalition’s statement of intent but has called for a “reset” in how the partnership functions. Meanwhile, ActionSA, led by Herman Mashaba, has made it clear that it will not entertain any discussions about joining a reconfigured coalition unless the VAT hike and income tax bracket creep are reversed.

ANC Secretary-General Fikile Mbalula announced the party would reopen consultations with coalition partners and even engage with parties outside the current arrangement. He emphasized that the GNU’s integrity must be defended, but not at the cost of tolerating “persistent sabotage.”

Why It Matters

The budget impasse is not just about fiscal policy—it’s a test of the coalition’s viability. Political analyst Lukhona Mnguni, speaking to Salaamedia, said of the ANC’s approach:

“The ANC’s meaning of research is not really about anything that has to do with government more than it has to do with political calculations in terms of what arrangement gives them security in terms of various votes they may need to get through Parliament.”

Mnguni warned that even with support from smaller parties, the ANC only commands a maximum of 202 out of 400 seats in the National Assembly—a precarious position.

“I don’t think that is a strong point of security to be, given that from time to time people are absent from Parliament and it may not be guaranteed that they are all in attendance,” he said.

The crisis has unfolded primarily in Parliament in Cape Town and at Luthuli House, the ANC’s headquarters in Johannesburg. The ANC’s National Working Committee met earlier this week, and the fallout is expected to be further addressed at the party’s upcoming National Executive Committee meeting.

How Is the Market Reacting?

The budget crisis has rattled financial markets. According to Investec economist Annabel Bishop, the rand has plunged to over R19.40/$, with fears it could crash to R22.00/$ if the DA exits the coalition. “The rand’s weakness is driven by domestic factors alone,” Bishop noted, citing the budget as a key risk factor.

What’s Next?

The DA has taken the matter to court, with a hearing scheduled for 22 April. Meanwhile, the ANC is considering a cabinet reshuffle and has not ruled out replacing the DA and FF+ with smaller, more compliant parties.

But Mnguni warns this could backfire: “There’s a bit of trying to solve for the moment and lose perspective in terms of the broader picture.”

The next few weeks will be crucial in determining the future of South Africa’s coalition experiment—and whether the ANC can govern effectively without the DA.