DA claims win in Treasury VAT U-turn, says ANC ‘deception happens repeatedly' in GNU

Daily Maverick

24-04-2025

The DA's 'muscle in the courts' was behind Finance Minister Enoch Godongwana's decision to scrap the VAT increase, says DA Federal Council chairperson Helen Zille.
The DA has claimed victory in forcing Finance Minister Enoch Godongwana to abandon the contentious 0.5 percentage point value-added tax (VAT) increase, saying its legal challenge against the hike was 'pivotal' in National Treasury's about-turn.
Treasury announced the reversal of the VAT increase minutes after midnight on Thursday, 24 April. It had been scheduled to take effect on 1 May.
The ANC and the DA, the largest parties in South Africa's 10-party broad coalition government, have been at odds over Godongwana's proposal to raise taxation, as announced in his Budget speech on 12 March. The impasse over the Budget has pushed the government of national unity (GNU) to the brink.
'Today is a cause for celebration because it is the clearest indication yet of what it means, to enable a party like the Democratic Alliance, fighting for the people of South Africa, to have the balance of power in the national Parliament,' DA Federal Council chairperson Helen Zille told reporters in Parliament on Thursday morning.
'The issue that the ANC fears more than anything else is that the public will come to understand the extent of the DA's muscle in holding the balance of power and the impact that we can make, both through the political process and then the legal process, if the political process proves impermeable, as it did this time.'
She added: 'While victory is a nose-length away, we still have to cross the finish line. It ain't over until it's over.'
The DA announced on Wednesday night that lawyers acting for Godongwana had approached its lawyers, proposing an out-of-court settlement, in the matter the DA brought to interdict the VAT increase scheduled for 1 May.
On Thursday morning Zille said the party was still awaiting a formal settlement offer from the minister's lawyers, before it would respond to his request.
Zille told reporters that the settlement offer took her by 'surprise', because 'less than one week before that, in his answering affidavit in our court case, the minister of finance made it absolutely clear that the VAT increase of 0.5% would go ahead on 1 May – and that was merely a week ago today'.
In an urgent application filed before the Western Cape Division of the High Court on 3 April the DA sought to challenge the legality of the process taken by both houses of Parliament to adopt the fiscal framework, and Godongwana's power under section 7(4) of the VAT Act.
The DA was seeking an interim order suspending Godongwana's decision to raise the VAT rate, pending Part B of its application in which it argues that the finance minister's authority under section 7(4) of the VAT Act is 'unconstitutional' because it grants him the power to raise taxes which, in terms of the Constitution, resides with the legislature.
A full bench of judges in the high court heard the application by the DA and EFF – which later applied to intervene in the case – to halt the implementation of the VAT increase, on Tuesday, 22 April.
'The arguments were so clearly framed that I have no doubt that the minister's legal team went back to him on Wednesday morning and said, it looks as if it is going to be inevitable that the 0.5% VAT increase that takes effect on 1 May, could well be set aside by the court,' Zille said.
'And in that context it seemed better for the minister to concede before he was perceived to have been forced to by the outcome of the DA's court challenge, and that is what has clearly happened.'
She said there was 'no doubt that the minister, in trying to save face, will seek to present this as the result of his discussions with the smaller parties'.
However, this argument 'cannot hold water' because most of the negotiations happened with the smaller parties before last Thursday, 'and yet last Thursday the minister categorically said that the VAT increase would go ahead and that there was indeed no alternative to it'.
'We can win battles, not by the grace and favour of kind concessions of the ANC, but because we have the numbers in Parliament and we have the muscle in the courts,' Zille said.
What next?
The DA and the ANC are scheduled to meet on Friday, after the meeting that was expected to take place between the two parties on Thursday morning was postponed by ANC secretary-general Fikile Mbalula on Wednesday night, according to Zille.
The ANC held a joint press conference at 10am in Johannesburg on Thursday, with parties inside and outside the GNU, including the IFP, PA, ActionSA, PAC, Rise Mzansi, Bosa, UDM, Good and Al Jama-ah, who supported the fiscal framework. In the briefing, Mbalula said that Parliament, not the courts, led to the reversal of the VAT increase.
Zille described Mbalula's cancelling of the DA-ANC meeting, to hold a press conference with smaller parties, as 'extraordinary'.
'What we have been asking for since the very beginning of the mooted VAT increase is now coming to pass. The minister has conceded that we were right in our arguments from the beginning, and yet he seeks to undermine his major coalition partner by holding a press conference with parties outside the coalition to claim victory on a point that we have been fighting for since the very beginning,' she said.
'This whole issue has not yet ended, there is still quite a battle to be run,' she said, referring to the outstanding formal settlement proposal.
'We are now expecting, from the minister's lawyers, a formal settlement proposal. We will respond to that settlement proposal through our own lawyers and if we can reach agreement… we will seek to have that agreement made an order of court,' said Zille.
However, because Parliament was also a respondent in the DA's case, Zille said the party has to seek a settlement agreement with both the National Assembly and the finance minister, 'because we can say that we have beaten this VAT increase'.
This gets complicated because there is no known precedent, according to Zille, for how Parliament's adoption of the fiscal framework can be set aside if it was unlawful and irrational.
In response to a question from Daily Maverick, Zille confirmed that the DA would continue with Part B of its court application, challenging the constitutionality of section 7(4) of the VAT Act.
She reiterated: 'We are yet to receive a formal, written settlement proposal from the minister. The minute we see what is in the settlement offer, we will know what he is asking and what he expects the DA to do. What we will not do is withdraw Part B of our application.'
GNU operating in 'very low trust environment'
In response to questions from reporters on the future of the GNU, Zille said it was not her position to say 'whether or under what circumstances the GNU should continue'.
'What the future is going to be for the GNU is something that I cannot categorically answer now. A lot will depend on what happens today,' she added.
Zille was frank with reporters about the mistrust within South Africa's power-sharing coalition.
'No other coalition government in a country that has a proportional representation system would have survived what this coalition government so far has survived,' she said.
'The ANC ignores the Statement of Intent every day. It pushes ahead with very major proposals, including this VAT increase, without seeking to get sufficient consensus with its major coalition partner. When we made it clear we're not going to support it, the ANC goes to parties outside of the coalition to see if they can win the majority…'
She said that in this instance the ANC achieved this through 'devious means', in deceiving smaller parties outside the coalition to get their vote.
'The deception all round is quite mind-boggling, and in most coalitions anywhere in the world that level of undermining would be fatal to any coalition. In South Africa we have to have thicker skins than normal.'
Zille said the EFF's argument in its court papers, that the ANC had deliberately deceived the smaller parties into believing that it would be prepared to scrap the VAT increase, was 'a very important argument because it continued to expose how the ANC deals with its partners in whatever forum'.
This level of deception 'happens repeatedly', she said.
'Coalitions are based on a foundation of mutual trust, and the big problem is that we have to operate in a very low trust environment,' she said.
She said this is because of a low trust environment that exists within the ANC, which makes a trusting relationship between the ANC and its coalition partners difficult to establish. DM