Latest news with #WilliamGumede
Mail & Guardian
41 minutes ago
- Business
- Mail & Guardian
BEE is essential for economic growth
Analyses of racialised disparities in both labour and product markets illustrate the need for strengthened economic redress. Photo: Delwyn Verasamy/M&G The debate about racialised socio-economic redress is at the centre of South African public policy debates. It has even permeated trade relations with the United States, which ironically has its own version of economic redress for minority groups in certain states. Yet US President Donald Trump is challenging redress policies in a country that has systemic racialised class and gender socio-economic inequalities. His views are echoed in Professor William Gumede's intervention in this debate. His article, which appeared in the There is general consensus in society that the current black economic empowerment model has largely failed to produce the intended socio-economic outcomes. But this does not mean the constitutional and policy imperatives underpinning redress should be abandoned. Several researched analyses of racialised disparities in both labour and product markets illustrate the need for strengthened economic redress. Gumede's extreme position overlooks this empirical evidence and draws on the following flawed arguments. First, he uses the term 'political capitalists' to describe individuals or enterprises that obtain state contracts or private equity in firms without any knowledge of business operations. These political capitalists are described as inherently parasitic by Gumede and he further suggests that they all have connections to the ANC-led political alliance. This generalisation is problematic because it assumes that only black-owned businesses obtain state contracts and established white corporations do not rely on state procurement. Policy and basic market intelligence reports refute this claim and illustrate how large corporations equally benefit from government contracts. Additionally, the term 'political capitalists' is conceptually and theoretically flawed because it creates a superficial divide between political and economic actors in a society. Political economy studies highlight that business and state relations are inherently connected in economic history. In simple terms: there is no Chinese wall between political and economic developments in a society. The second problem with Gumede's view is that he says BEE is primarily responsible for structural issues such as deindustrialisation, poverty, inequality and unemployment. This proposition is not backed up by evidence and he does not explain how he arrived at this conclusion. Research literature on economic trends challenge Gumede's position. Deindustrialisation in South Africa has been caused by structural changes in the economy, especially since the early 1990s. Trade and financial liberalisation exposed our domestic manufacturers to competition in key sectors such as textiles. In addition, the country's financial sector has prioritised short-term investment returns and implemented investment risk strategies that make it difficult for enterprises interested in long-term economic activity associated with sustaining South Africa's industrial base. Furthermore, there are several studies on the causes of poverty and inequality. This research explores multidimensional causes and does not cite economic redress policy as an impediment for addressing systemic socio-economic exclusion. In other words: there is no factual basis for Gumede's proposition on the causal link between BEE and the economic structural fault lines cited above. Another flaw in Gumede's article is the erroneous and sweeping generalisation about corruption. He attributes corrupt or patronage-based networks in the economy to the creation of BEE. This narrow approach is not based on a holistic understanding of corruption in the economy. The Zondo Commission Report and other authoritative market behaviour investigative accounts elucidate illegal economic activities that go beyond the scope of BEE policy implementation. For example, practices such as price collusion, tax evasion and dividing product markets. Actually, some of the established multinationals that Gumede and others laud were cited as facilitators of corrupt dealings in these reports. Corruption is a significant impediment for inclusive growth in South Africa. But it is incorrect to suggest that it is solely caused by BEE. Economic rents such as incentives, subsidies and preferential procurement policy instruments are used across the world successfully. These measures are not abnormal or inherently corrupt if used for developmental purposes. Dr Khwezi Mabasa is a part-time sociology lecturer at the University of Pretoria and Economic and Social Policy lead at Friedrich-Ebert-Stiftung South Africa.
IOL News
5 days ago
- Business
- IOL News
Is ANC cadre deployment causing the downfall of South Africa's state-owned enterprises?
Experts shed light on how cadre deployment has led to the collapse of state-owned enterprises. Image: Henk Kruger / Independent Newspapers The majority of people employed as chief executives, executives, and board members in state-owned entities are incompetent, do not know the sectors they operate in, are without skills, and don't even know what they are doing, experts say. Governance, economic, and political experts say that South African leaders lack the political will to fix the problems. The SOEs have cost the country billions of rand in bailouts. Many of them are struggling with massive debt, under-investment in infrastructure, and continuous reliance on government bailouts. Eskom, Transnet, South African Airways, Denel, and the South African Broadcasting Corporation (SABC) have accumulated significant losses and debt. The Treasury has since announced that no funds have been allocated to struggling SOEs. Video Player is loading. 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Advertisement Next Stay Close ✕ Professor William Gumede from the Wits School of Governance said incompetence is the main issue, resulting from hiring unskilled, politically connected people. 'Most of the CEOs, most of the boards, most of the executives are appointed because of their political connections. So, people are not appointed based on merit. They do not know what they are doing, they don't know how to manage an organisation, and they also don't know the sector where they are operating. 'Sometimes you may not know the sector, but if you are very well skilled, you'll be able to turn around something. But now, often what happens with politically connected people that get appointed is they don't know the sector, are also not competent, so you have a double destruction of entities,' Gumede said. He added that the second problem is corruption, where procurement processes are manipulated based on Black Economic Empowerment. 'They don't appoint capable black-owned companies, they appoint politically connected companies, who don't deliver. 'So you (SOEs) pay for services that don't get delivered. Many of these companies inflate the prices. So, there are double and triple payments for products and services, for no delivery. They suck the money out of the entities without delivering services also. 'Even if there was corruption, if services are delivered, at least one could say that at least services are being rendered, but now there are no services and there is no money left. 'So, now you are left with management and board members without appropriate skills, not knowing the sector, not knowing the entity, and then they run the entity into financial distress. And then you have your empowerment process, which has been abused and manipulated, and you lose money there also,' he explained. He added that another challenge is that many of the entities are very unionised. And the unions are aligned with the ANC as part of the Tripartite Alliance. 'Often, union members can't be fired by the entities because they just go to the union. And the union will protect them, or it will even go straight to the president. I know, at Eskom for example, instances where senior union leaders, who are part of the staff, and when the CEO wants to fire them, they actually phone the president straight. 'So, it means they are untouchable, they don't have to work. They don't have to be efficient, they don't have to be effective, and they cannot be fired,' he said. Gumede highlighted that at almost every level in the SOEs, there is political capture and interference. 'No one can be held accountable, no one can be fired. You can't fire the board, you can't fire the management, because they are all politically connected. You can't fire your staff because they are trade union connected, you can't fire the companies that don't deliver, because they are also politically connected. 'When the entities are bailed out, they are bailed out with the same things in place, so you've got the same management; you have the same board, the same staff, the same procurement companies that cannot be fired. So, the money just disappears into a hole all the time,' Gumede said. He said one of the moral hazards created by bailouts is that most people ideologically believe state companies should not close down because they create jobs. 'Bailing out a company without holding management and companies accountable is like throwing money into a bottomless pit. In fact, bailing out state entities is a misallocation of government resources. 'Black people who are competent but not politically connected get marginalised, they don't get jobs or promotions. Even competent black-owned companies get sidelined because they are not politically connected, and this becomes a lost opportunity to get the right people to turn things around,' Gumede said. 'Some of the entities must close down. If you can't improve performance even after a bailout, you have to close down, just like in the private sector.' He said the various SOE reform initiatives, such as Operation Vulindlela and the National State Enterprises Bill, don't reform anything, but waste state money and people's time. These bills miss the mark because people should be hired based on merit and fired if they don't perform. He said ordinary citizens are not doing enough. 'They must stop voting for political parties that fail to deliver. They must hold the entities accountable. They must be vocal about these issues,' he said. Politicians should not appoint the CEOs and boards of SOEs. That must be professionalised or left to an independent panel, and there must be public transparency in the process. Also, employees must be depoliticised, he said. Gumede was part of the 2009 Presidential Review Commission on SOEs, however, these have not been implemented despite being approved and adopted by the Cabinet. Under President Cyril Ramaphosa's administration, he was part of the Task Team on the Professionalisation of Public Services, and says that the recommendations have not been implemented. Professor Sipho Seepe, a political analyst from the University of Zululand, said there are no hurdles that stand in the way of the effective implementation of SOE reforms other than a political will. He said SOEs have been reduced to employment agencies for the politically connected. 'If the number one citizen (Ramaphosa) can be allowed to avoid accountability as far as the Phala Phala scandal is concerned, how can we expect lowly public servants not to do the same. The president must lead by example. So far, he has failed dismally. Until then, we should not be surprised that there is a general failure insofar as proper governance is concerned.' Dawie Roodt, a chief economist from Efficient Group, said: 'If there's one institution that I would like to blame for how we got here (failing SOEs), it is the ANC. Ideologically, the ANC believes and talks about the developmental state and centralisation. 'Secondly, they've got the policy of cadre deployment, and what often happens is that they employ people in positions because they are loyal to the party and not because they can do the job. Quite often, you find incompetent people in high positions. Thirdly, you often find very high levels of corruption. So, the combination of all these things inevitably then leads to the collapse of these state-owned enterprises.' Roodt said many of these SOEs are crucial to the economy. Eskom, for example, is important, but gradually, the economy is weaning itself off Eskom by putting in solar panels. Harbours are still very important for exports, and the railways. 'In the past, you had various levels of government. The lowest level of government is local authorities, which have their revenue sources, own tax base, and balance their books. They did not need the Minister of Finance. 'The same goes for the SOEs. The state-owned enterprises could wash their faces. They had their revenue sources, good-rated debt, like Eskom's debt. At one stage, it was better rated than the state's debt. They could stand on their own feet financially, but what has subsequently happened, not only at the state-owned enterprises, but local authorities, because of mismanagement and cadre deployment, they have been run into the ground operationally and financially. Those institutions now need to be bailed out by the central (national) government,' Roodt said. According to Roodt, the Minister of Finance has his problems, as the Department of Finance and others have been mismanaged. And in the process, state debt levels have reached a record high, but it's much worse than what we think because, since the SOE and local authorities are also depending on the state. He said there is a need to fix the country's political leadership before things can improve. One must look at the Zondo Commission's report and ask oneself why it has not been implemented. 'The problem is they are not prepared to act, and to enforce the laws. Zondo did all the work, and the reason why that has not been implemented is that the cadres are implicated. Proof is there for everybody to see; all they need to do is start prosecuting, but it is simply not happening. So if they don't implement the Zondo Commission report, then I do not have any hope that they will start acting against corruption,' Roodt said.
The Citizen
07-05-2025
- Business
- The Citizen
SA's economic growth outlook growing increasingly dim
South Africa is not alone, either: the outlook for global economic growth is also being cut due mainly to the US' import tariffs. South Africa's economic outlook is growing increasingly dim as various organisations and analysts start cutting their economic growth outlook for the country to only 1.5%. Moody's Ratings and the Bureau for Economic Research both cut South Africa's economic growth outlook to 1.5% from 2% expected previously, while Prof William Gumede, associate professor at the Wits School of Governance writes that National Treasury's gross domestic product (GDP) growth forecast of 1.9% in 2025 is based on optimistic assumptions. According to Moody's Global Macro Outlook 2025-26, a global growth slowdown is underway, with policy uncertainty adding risks. The agency warns in its report that tariff increases on countries and high sectoral tariffs on products, such as steel and aluminium, will weigh on global trade and investment decisions, with considerably negative growth consequences for most G20 economies. 'Given these developments, we have cut our forecast for global growth sharply to 1.9% in 2025 and 2.3% in 2026 from our forecast in February, which called for a more modest slowdown to 2.5%. Policy uncertainty weighs on a global economy that was already slowing. 'Uncertainty surrounding global economic policies is likely to take a toll on consumer, business and financial activity. Despite a pause and reduction in some tariffs, policy uncertainty and trade tensions, especially between the US and China, are likely to dampen global trade and investment, with consequences across the G20. ALSO READ: Experts say no way SA can achieve economic growth of 3% this year Grim global and South African economic growth outlook Moody's now expects that US GDP growth will cool to 1% in 2025 and 1.5% in 2026, and China's real GDP growth to slow to 3.8% in 2025 and 3.9% in 2026. The agency also cut growth forecasts for Canada, Mexico, Germany, France, Italy, the UK, Australia, Korea, Japan, India, Indonesia and South Africa. For South Africa, Moody's cut its real GDP projections by 0.2% from its February projection to 1.5% and is more optimistic than the IMF, which expects South Africa's economy to grow by only 1% this year and only 1.3% in 2026. Meanwhile, Lisette IJssel de Schepper, chief economist at the BER, said at a BER conference on Tuesday that South Africa's growth is also affected by tensions in the government of national unity (GNU) and concerns that it will not hold and function effectively after the dispute about Budget 2025 almost caused it to collapse. However, she said the biggest source of uncertainty at the moment is around tariff policy. 'The risk of sudden policy changes remains real, such as Monday's foreign film tariff announcement. We only expect price increases and product shortages to affect US consumers from mid-June.' She also pointed out that real consumer spending, which is necessary for economic growth, accelerated from 0.7% in 2023 to 1.0% in 2024, but consumers are still worse off in real per capita terms. 'Alarmingly, the 0.7% growth in consumer income in 2024 was virtually fully derived from the roughly R40 billion two-pot withdrawals since 1 September, and despite the two-pot boost in 2024, real per capita disposable income was down 1.3% compared to 2022 and 2.4% compared to 2018.' ALSO READ: No significant economic growth expected for SA over next three years Factors that can affect global and local economic growth De Schepper said global factors that could warrant a change in the BER's baseline forecast include severe financial market instability that triggers a real economic downturn, a sudden reversal in the oil price and continuing geopolitical turmoil in the Russia-Ukraine war, the Middle East and the Taiwan Strait. She said domestic factors include the return of sustained and/or higher stages of load shedding, negative shocks to South Africa's production capacity and/or export potential, the possibility of social unrest, protests and strike action and revisions to historic GDP data. ALSO READ: Absa foresees economic growth of 2.1%, but Trump and budget can disrupt it Are we a 1% economy? De Schepper says the BER made a significant downward adjustment to its near- and medium-term real GDP forecast, with some members of the team arguing for an even lower forecast, questioning why we are not a permanent 1%-growth economy as we have been for the last fifteen years or so. 'It is irresponsible to build a forecast on hope. During the second half of 2024, there was a real sense of urgency around structural reform, sentiment was improving, and the consumer benefited from some (temporary) windfalls. 'Our forecast of the time was not based on hope, but on the expectation of some crucial puzzle pieces finally falling into place. Unfortunately, some puzzle pieces are now sliding from the table once again (slow progress on structural reform, consumer windfalls turning into headwinds), and some pieces have been forcefully thrown on the floor by Trump.' However, she said, it is also irresponsible to overreact when there is so much uncertainty. 'While slow, there is still some progress on the structural reform front. Load shedding and other structural constraints on the local economy should continue to ease, albeit not as fast as we anticipated. 'Indeed, when it comes to exports and investment, our level is so depressed that a little goes a long way to lift overall GDP growth. South African consumers have proven to be resilient before, but will continue to be tested.' ALSO READ: World Bank has simple answer to improve South Africa's economic growth Treasury too optimistic about South African economic growth Gumede writes in an occasional paper for the Inclusive Society Institute titled 'Going for growth: Structural reforms needed for South Africa's economic recovery', that Treasury's forecast fails to reflect the country's ongoing structural obstacles to growth, including its public service, governance, policy and debt woes. 'If South Africa stays on its current economic policy path or becomes more economically populist and if it is unable to strike a compromise deal with the US, it is unlikely to get even the 1.9% GDP economic growth predicted by Treasury in the 2024/2025 Budget. 'Treasury predicts real GDP growth of 1.9% in 2025, an upward revision from the 1.7% projected in the 2024 Medium Term Budget Policy Statement (MTBPS). Over the medium term, economic growth is projected to average 1.8%. The past decade has seen the economy grow only 0.8% per year, while the country's population has been growing at 1.5% per year.' Gumede says the Treasury growth forecasts assume higher investment, recovery in household consumption, declining inflation, moderately rising employment, improving household balance sheets and easing structural constraints on growth. However, he believes Treasury's growth forecast appears to be overly optimistic. ALSO READ: IMF's bad news about economic growth for SA, thanks to Trump tariffs Treasury not considering continued obstacles to economic growth 'Treasury does not appear to consider the continued structural obstacles to growth, such as the continued lack of state capacity due to public service, state-owned entities (SOEs), infrastructure and municipal failures caused by corruption and incompetence and the many anti-growth policies. 'High levels of business regulation also undermine growth. Moreover, global uncertainties threaten economic growth. US President Donald Trump unleashed widespread global tariffs, including 30% against South Africa, and has cut development funding to the country.' Gumede says the US withdrawal of development aid, which included significant amounts for state, public, and civil society institutions, left a big hole in South Africa's public finances. 'Instead of infrastructure-led growth, South Africa got consumer and welfare-led growth, which is not sustainable. It is not possible to change the country's growth path without tackling the structural inhibitors such as corruption, incompetence, state, SOE, DFI and municipal failure and anti-growth, anti-business policies. 'A new growth path must be based on boosting infrastructure, creating a manufacturing mining processing complex, especially around critical minerals, an agriculture industrial complex, expanding renewable energy, establishing a biofuels industry, expanding SMEs and fostering new industries that South Africa lacks, but which the world needs. Such a new growth path has to be collaboratively led by government, private sector, civil society and professionals.'
Mail & Guardian
25-04-2025
- Business
- Mail & Guardian
Decolonise the mind to power a green future
Extraction: Among the green minerals is copper, which is mined in the Democratic Republic of the Congo, Zambia, South Africa and Namibia. As the global race for critical minerals intensifies, from lithium in Zimbabwe to cobalt in the Democratic Republic of the Congo, Africa finds itself, once again, rich in resources but poor in power. Green industrialisation is being touted as the continent's opportunity to move beyond extraction to manufacture green goods. But this opportunity will pass us by if African leadership continues to be held hostage by the psychosocial legacies of colonialism. This is not just about policy. It's about consciousness. Philosopher and anti-colonial thinker Frantz Fanon warned us that colonialism doesn't end when the colonisers leave. It lingers in the psyche. In Black Skin, White Masks, he wrote about how colonised people internalise the logic of their oppressors, aspiring to hold the power of the oppressor, governing in ways that serve global capital rather than their own people. He argues that this becomes a major obstacle to genuine liberation. Across Africa, post-independence elites often reproduce colonial power structures preserving extractive economies, obeying the rules of the global capitalist order and prioritising the needs of foreign investors over their own citizens. As South African analyst William Gumede has pointed out, South Africa remains a 'postcolony', politically independent, but still economically manipulated. The apartheid-era structures of racialised accumulation remain intact, simply rebranded for the global neoliberal order. South Africa, like many other African states, once aspired to become a developmental state, a model that channels state resources, market incentives and civil society mobilisation to uplift the population. But those ambitions have been steadily eroded by a fear of capital flight, the discipline of debt and an elite class too comfortable with the status quo. The result? A state that protects monopoly and financial capital while failing to deliver justice, dignity or economic inclusion for the majority. This mindset is evident in the budget crisis, where the ANC insisted that increasing VAT was the only viable way to raise revenue, while rejecting the option of raising wealth or corporate taxes, citing fears that the wealthy would exploit loopholes or withdraw investment. This fear is not simply political. It is psychological. It is the 'colonial wound' Fanon described, the inability to see ourselves as agents of our own futures. This matters because African green industrialisation is not just about climate. For Africa, it offers an opportunity to break with patterns of extraction that have served external interests, and instead pursue a path that centres sovereignty, justice and economic transformation. Green industrialisation means using Africa's mineral wealth not simply for export, but as strategic leverage to build domestic and regional value chains. This demands that we rethink the logic that underpin industrial development, moving beyond linear models focused on capital gains, and toward approaches that are regenerative, redistributive, circular and socially embedded. Africa's green industrialisation can follow different pathways, from mainstream strategies to transformative ones including decarbonising industries such as construction, infrastructure and renewable energy generation, developing domestic processing and manufacturing capabilities of critical minerals such as in battery technology, public transport systems and energy-efficient appliances tailored to African contexts. Transformative strategies challenge extractivism and embrace ecological, socially owned and circular models. These may include large-scale recycling, repurposing and urban mining of metals and minerals already in circulation to reduce the demand for new extraction; transitioning agriculture and agro-processing away from industrial inputs and fossil fuel dependencies toward agroecological systems that restore soils, enhance biodiversity and build food sovereignty; community and socially owned renewable energy production, ensuring energy transitions serve public needs and are not captured by corporate or elite interests and democratising ownership and decision-making in green industries. If scaled, these efforts can do more than boost national economies, they can transform lives. Locally rooted manufacturing and processing will create jobs, support small businesses and build skills in communities. Cleaner energy systems will lower household energy costs and reduce environmental harm. Most importantly, this shift can create a future where development is people-centred, less dependent on volatile global markets and driven by Africa's needs and capacities. As highlighted in the Alternative Information and Development Centre's report The Controversy of Green Energy: Unmasking Southern Africa's Critical Mineral Sacrifice Zones, the expansion of green energy and green industrialisation, must not replicate the injustices of past and present mining regimes. But none of this is guaranteed. Without a conscious political project, and leaders willing to resist neo-colonial pressures, we risk simply greening the same extractive, unequal and externally-dependent model we've been trapped in for decades. In recent months, US President Donald Trump has proposed sweeping new tariffs. Framed as a strategy to protect American workers and reduce reliance on China, these protectionist measures aim to promote domestic industry, assert US economic sovereignty and reconfigure global trade in favour of American interests. The proposals have not been universally welcomed. Allies and rivals alike have raised concerns, and many economists warn of rising global trade tensions. Yet few countries have the leverage to meaningfully resist or retaliate. Only large power blocs — such as the European Union or China — have the capacity to push back. The rest, particularly in the Global South, are often left managing the ripple effects of such shifts, with limited room to shield their economies from external shocks. This geopolitical asymmetry is further illustrated by recent policy developments in the European Union. The Carbon Border Adjustment Mechanism (CBAM), for example, imposes carbon-related tariffs on imported goods such as steel, aluminium and cement. While presented as a climate policy, The CBAM risks penalising developing countries that lack the resources to decarbonise at the same pace as Europe, which will affect our ability to green industrialise. Instead of supporting low-carbon transitions in the Global South, it is more likely to entrench global trade hierarchies under the guise of climate justice. Similarly, the EU's Critical Raw Materials Act identifies strategic minerals essential for Europe's green transition and sets targets to secure them through domestic extraction and 'strategic partnerships' abroad. African countries are expected to supply these materials under conditions dictated by European industrial needs, not African development priorities as in the case of Namibia's green hydrogen projects. This reinforces an externalisation of ecological and social costs — where Africa provides the inputs for a green transition it is largely excluded from shaping or benefiting from. Yet when African governments adopt similar tools to assert their interests — through export bans, local content requirements, beneficiation mandates or industrial tariffs — they face strong resistance. Institutions such as the International Monetary Fund and World Bank warn of 'market distortions'. Investors threaten divestment. Commentators label such measures 'protectionist' or 'populist', even when they are embedded in democratic development agendas. What emerges is not simply a contradiction, but a structural reality: the rules of global trade and investment are shaped by power, and power determines who can bend or rewrite those rules. When large economies intervene to protect or reindustrialise, it is accepted as strategic. When African states seek to do the same, they are expected to remain 'open' and 'market friendly'. This is why African countries must build the political and institutional power to define their development paths, not by mimicking the West, but by advancing decolonial and redistributive alternatives. Regional solidarity, democratic control over resources and policies grounded in the realities of African economies must be central to that project. To succeed, Africa must delink from exploitative global systems — whether controlled by Washington, Brussels or Beijing — and build robust, pan-African institutions and markets. This means deepening continental trade through the African Continental Free Trade Area, harmonising industrial policies, and investing in shared infrastructure and research systems. But it also means reclaiming ideological ground. Development cannot simply be about GDP growth or investor confidence. It must be about dignity, equality, ecological sustainability and the right of people to decide their own futures. Fanon believed freedom wasn't just about ending colonial rule — it was about freeing the mind. Gumede, echoing this, argued that the path to African emancipation requires 'a self-awareness of the subservient position that the continent occupies in the global matrix of power', and a conscious break from the 'socio-economic and political structures that make exploitation and domination possible'. Africa's green transition won't succeed with leaders afraid to act, to disrupt, to imagine differently. It won't succeed with extractive elites beholden to foreign capital. It will only succeed if we decolonise not just our economies, but our consciousness. And that is the hardest revolution of all. Charlize Tomaselli is a senior researcher at the Alternative Information and Development Centre.
Yahoo
03-04-2025
- Business
- Yahoo
Is South Africa's coalition government about to fall apart?
South Africa's coalition government is on shaky ground, with the sharp divisions between its two biggest parties - the African National Congress (ANC) and Democratic Alliance (DA) - exposed in a crucial vote on the national budget. The centre-right DA voted against the fiscal framework - a key part of the budget - after rejecting an increase in VAT, and demanding a cut in spending across all government departments. The ANC, which positions itself as a centre-left party, refused to bow to what it called the DA's demand for an "austerity budget". It demonstrated its political acumen by winning the support of a slew of smaller parties - both inside and outside government - to get the fiscal framework through parliament by 194 votes to 182. The DA filed papers in court to challenge the vote, saying it was "procedurally flawed" while its top leadership is due to meet later to decide whether or not to remain in what South Africans call a government of national unity (GNU). Professor William Gumede, an academic at Wits University's school of governance in Johannesburg, told the BBC it was unclear whether the DA would quit the government at this stage. "It will be asking itself whether this is the tipping-point or whether it should wait - at least until the outcome of the court case," Prof Gumede said. The coalition government was formed less than a year ago after the ANC lost its parliamentary majority in elections for the first time since Nelson Mandela led it to power in 1994 at the end of white-minority rule. South Africa's business sector lobbied the two parties to enter into a coalition, seeing it as the best option to guarantee economic stability. South Africa in 'uncharted waters' as budget splits coalition government A landmark moment in South Africa for a humbled ANC Is it checkmate for South Africa after Trump threats? But hinting that the DA's participation was no longer certain, DA spokesman Willie Aucamp accused the ANC of a "serious infraction" and said the party had "crossed a line in the sand". DA federal chair Helen Zille said the party would consider all its options, and not rush into a decision. "We know that being in a coalition requires compromise. You can't get it all. But the ANC also can't get it all, and they are refusing, point blank, to share power," Zille added. The ANC took an equally tough stand, with its parliamentary chief whip, Mdumiseni Ntuli, accusing the DA of "complete betrayal" by breaking ranks with its partners in the GNU. "The DA is a member, or was a member," Ntuli said. "I don't know what is going to happen with them now, but the GNU remains," he added, referring to the fact that other parties in the 10-member coalition remain committed to it. President Cyril Ramaphosa's spokesman Vincent Magwenya also threw down the gauntlet to the DA, saying: "You can't be part of a government whose budget you opposed." The DA found itself voting alongside South Africa's two biggest, and most populist, opposition parties - former President Jacob Zuma's uMkhonto weSizwe (MK) party and Julius Malema's Economic Freedom Fighters (EFF). Advocating the nationalisation of key sectors of the economy, these two parties are the impeccable foes of the pro-business DA. But the three parties were united in opposing a VAT increase, believing it would hit the poor hard. As DA leader John Steenhuisen put it: "The ANC is out of touch with the people, and if they bought their own groceries or filled their own tanks, they would know how expensive life already is." But the ANC argued that a VAT increase - set at 0.5% this year and a further 0.5% next year - was necessary to raise revenue, and to offer public services such as health and education. Crucially, the Inkatha Freedom Party (IFP) voted with the ANC, signalling the end of the alliance it formed with the DA in the build-up to the election in a failed bid to keep Ramaphosa's party out of power. ActionSA - a small opposition party which broke away from the DA - helped the ANC clinch the vote. It said it had reached a deal with the ANC that would see the VAT increase scrapped, while alternative ways of raising revenue for the government are explored. "Yesterday's [Wednesday's] adoption of the report on the fiscal framework was merely one step in a multi-stage budgeting process before the final budget is approved," ActionSA said in a statement. Prof Gumede said the ANC would find it difficult to convince the public to pay more taxes when public services were crumbling. "The optics don't look good for the ANC," he told the BBC. "The DA has taken the budget as an opportunity to make a big impact, and to show it is pro-poor." The dispute over the budget is the latest sign of the sharp differences between the two parties, with the DA also challenging in the courts three other pieces of legislation - including the land expropriation act. This law was one of the issues that led to US President Donald Trump's administration cutting aid to South Africa. The Trump administration has now imposed tariffs of 30% on all South African imports, in a move that is likely to be a huge blow to its already floundering economy. "They have got some bad things going on in South Africa. You know, we are paying them billions of dollars, and we cut the funding because a lot of bad things are happening in South Africa," the US president said, before going on to name other countries. In a statement, Ramaphosa's office condemned the new tariffs as "punitive", saying they could "serve as a barrier to trade and shared prosperity". But for many South Africans, the tariffs signal the need for the two biggest parties to resolve their differences and work together - or risk seeing the nation sink into a deeper economic crisis at a time when the unemployment rate is already at more than 30%. What big business wants for South Africa's future South Africans still battling 'economic apartheid' 30 years on Race policies or Israel - what's really driving Trump's fury with South Africa? Go to for more news from the African continent. Follow us on Twitter @BBCAfrica, on Facebook at BBC Africa or on Instagram at bbcafrica Africa Daily Focus on Africa
