Coalition crisis: DA challenges ANC's VAT hike in court, threatening GNU collapse

The DA’s decision to take the 0.5 percentage point VAT hike and the fiscal framework document to court for review has sparked a chain reaction that may ultimately lead to the demise of the Government of National Unity (GNU).

The Presidency has hinted that President Cyril Ramaphosa may re-evaluate the ANC's partnership with the DA, Presidency spokesperson Vincent Magwenya reportedly confirmed.

"You can't be part of a government whose Budget you opposed." 

Magwenya added that Ramaphosa would "take his time" to reflect on the situation, but the writing appears to be on the wall.

The ANC has already begun to distance itself from the DA, with Finance Minister Enoch Godongwana before the Budget vote in Parliament on Wednesday saying that his party would have to draw the line.

"You can't vote against the Budget and the next day, you want to implement that Budget. We have to draw the line,” Godongwana said.

As the GNU teeters on the brink of collapse, both the DA and the ANC are reportedly exploring options for new partnerships. 

A senior ANC member, who wished to remain anonymous, revealed that the party had attempted to broker a deal with the DA to keep the power-sharing pact intact but had been rebuffed.

“We are now in talks with the other smaller parties to get the GNU to grow bigger if the DA decides to leave the arrangement,” the source said.

The DA on Thursday morning filed an urgent court application at the Western Cape High Court, challenging the adoption of the 2025 Fiscal Framework and Revenue Proposals, which include the VAT hike. 

The party claims that the decisions taken by the National Assembly and National Council of Provinces (NCOP) this week were "fundamentally flawed" and "unlawful."

At the heart of the dispute is the proposed 0.5% VAT increase, which is set to come into effect on May 1, 2025. 

The DA argues that this increase will have a devastating impact on ordinary South Africans, who are already struggling to make ends meet.

"The VAT hike is a regressive tax that will hurt the poor and vulnerable the most," the DA wrote in its court papers.

The DA's court application challenges the legality of the fiscal framework adoption process, citing several irregularities. These include the failure of the Standing Committee on Finance and Select Committee on Finance to vote on the final report's wording and the inclusion of a non-binding recommendation to reconsider the VAT hike.

"The reports adopted by the National Assembly and NCOP are unlawful and invalid," the court papers added. 

"We urge the court to set aside these decisions and remit the matter back to the committees for reconsideration."

The DA also takes issue with the Minister of Finance's power to change the VAT rate without parliamentary approval, as per section 7(4) of the VAT Act. It argues that this provision is unconstitutional and undermines the authority of Parliament.

The party on Thursday announced that their Federal Executive has been mulling over options on whether to leave the GNU or not.

However, a source within the DA ranks said some of the Fedex members were frustrated at its leader, John Steenhuisen, for continuing discussions with the ANC over policies.

Political Analyst Sandile Swana said the decision to take the Budget to court may be nothing more than a futile exercise. 

Swana believes the court's hands are tied, and the most it can do is refer the decision back to Parliament.

"The DA wants itself in the GNU, but Ramaphosa may want BOSA and ActionSA inside, reducing Cabinet posts of the DA," Swana said, highlighting the party's precarious position in the GNU.

Swana further emphasised that the majority of the Standing Committee on Finance, led by ANC’s Joe Masangwanyi, had already approved the fiscal framework, and the DA's opposition was ultimately unsuccessful. 

"The majority has been consistent, and these are political matters that must be decided by politics, which means that there must be voting at the end of the day," Swana said.

With the Budget already passed by the National Assembly, Swana's assessment suggests that the DA's court action may be too little, too late.

mashudu.sadike@inl.co.za