VAT Debacle Exposes the ANC's Policy Contradictions

IOL News

04-05-2025

Protesters from unions, farmworkers associations, gender organizations, and other civil society groups, protest outside Parliament against proposed austerity measures and a 2% increase in VAT on March 12, 2025, in Cape Town. Budget cuts, service delivery crises, and policy timidity erode the credibility of the ANC's promises. The gap between political rhetoric and economic policy has become too wide to ignore, says the writer.
Dr. Reneva Fourie
THE tension within the Government of National Unity (GNU) surrounding whether or not there should be an increase in Value Added Tax (VAT) exposed the policy vacillation within political parties.
Civil society groups, trade unions, grassroots movements and left-leaning political parties took to the streets well before the announcement to reject the regressive tax that would disproportionately affect people experiencing poverty. Treasury nonetheless proceeded with the tabling of the VAT proposal. When opposition intensified, the government retracted the proposal for the national budget to pass.
The game has become tiring for countless South Africans for whom the gap between government promises and reality keeps widening. Rising unemployment, failing public services, the rising cost of living and ongoing inequality are leading to growing disappointment with the post-apartheid government.
While some individuals turn to narrow ethnic nationalism, yearning for the Afrikaner and Bantustan ideologies of the past, those who envisioned a united, non-racial South Africa are despondent. Central to this despondency is a stark recognition that the African National Congress (ANC), once regarded as the leader of society, is now wrestling with declining legitimacy and deepening contradictions.
It is tempting to reduce the ANC's crisis to a familiar story of betrayal, of a party that traded its soul for power, privilege, and proximity to capital. Indeed, the movement's post-1994 trajectory includes troubling chapters: the adoption of neoliberal macroeconomics under GEAR, the state capture rot of the Zuma era, and the Ramaphosa administration's ongoing entanglement with big business.
Yet, to stop there is to miss the full complexity of the dilemma. The ANC's compromises are not simply a matter of bad choices; they also reflect the constrained governance terrain in a highly unequal, globalised economy.
The reversal of the VAT decision was more than just a tactical withdrawal; it exposed the challenges the ANC encounters due to the dual burden of being a liberation movement and a governing party in a volatile and unforgiving environment.
Furthermore, it revealed an increasing gap between the ANC's articulated policy goals, as seen in their conference resolutions and election manifestos, and the decisions emerging from the Treasury. The contradiction raises uncomfortable questions about who sets the fiscal agenda and whose interests it ultimately serves.
South Africa's economic policy space is shaped by more than just the largest governing party. Treasury officials operate under the significant influence of rating agencies, global investors, and financial institutions. The country is threatened with declining creditworthiness, increasing capital flight, and bond spreads, which weigh heavily on policymakers. The fear of triggering market panic often leads to risk-averse strategies, even when the social costs are devastating.
The influence of global financial institutions like the International Monetary Fund and World Bank looms large. Their language of 'structural reform' and 'fiscal discipline' may be less prescriptive than in the past, but their signals carry weight. Like many other countries, South Africa finds itself navigating a delicate tightrope, trying to balance appeasing the markets while attempting to address entrenched poverty and inequality.
Domestically, these global dynamics are compounded by the enduring power of local capital. South Africa's economic elite – largely shielded from the social consequences of apartheid – has shown little appetite for a more inclusive growth path.
Calls for wealth taxes, land reform, or meaningful industrial policy are routinely met with resistance. Rather than confronting these interests head-on, ANC leaders have often opted for incrementalism and consensus-building. That strategy may have ensured political stability, but it has left structural inequality intact.
The opposition, meanwhile, has seized on the ANC's contradictions with vigour. During the VAT uproar, the Democratic Alliance (DA) positioned itself as a champion of the poor, lambasting the proposal as unjust. But the DA's record tells a different story.
It is one of support for austerity, privatisation, and limited state intervention. Its sudden concern for the working class appeared more opportunistic than principled, using the ANC's missteps to advance an arguably more hostile agenda to redistribution.
Still, the criticism the ANC faces is not without merit. The party often speaks the language of justice and transformation, invoking the legacy of the Freedom Charter during election season. But once in office, the tone shifts. Budget cuts, service delivery crises, and policy timidity erode the credibility of its promises. The gap between political rhetoric and economic policy has become too wide to ignore.
The issue goes beyond mere hypocrisy or inertia. The ANC is constrained by the legacy of apartheid's institutional architecture, which limits the government's ability to pursue meaningful redistribution. These structural challenges, along with internal divisions and weaknesses within the ANC, have led to a state that is reactive, fragmented, and vulnerable to elite capture. And so the ANC finds itself trapped: caught between the demands of the market and the demands of the people.
Despite its many failings, the ANC remains central to South Africa's political landscape. It continues to command significant support, especially among those who remember its overwhelming contribution to ending apartheid.
However, that legacy, though powerful, cannot carry the party forever, and many wonder if there is any hope that the ANC will ever be restored to its former glory. The challenges the ANC faces extend far beyond its internal contradictions and missteps. Its leaders do not appear to possess the courage, clarity, and willingness to confront its internal complacency and external constraints.
As the party attempts to chart a course through this complex terrain, the disjuncture between its stated policies and government action continues to erode its authority. However, while the opposition may gain ground by highlighting the ANC's failings, no political party can claim credibility without addressing the economic structures that entrench inequality.
Achieving a more just and inclusive society will require policy reform and a clear break from the economic orthodoxies and vested interests that have long shaped the country's neoliberal trajectory.
* Dr Reneva Fourie is a policy analyst specialising in governance, development and security.
** The views expressed do not necessarily reflect the views of IOL, Independent Media or The African.