A deepening budget dispute between South Africa’s ruling coalition and its opposition party threatens to upend the fragile government, leaving economists warning of a potential economic crisis.
The African National Congress (ANC) and Democratic Alliance (DA), the two largest parties in South Africa’s coalition government, are exposing their sharp divisions over a crucial vote on the national budget. The centre-right DA voted against the fiscal framework, rejecting an increase in VAT and demanding a cut in spending across all government departments.
The ANC, positioning itself as a centre-left party, refused to bow to the DA’s demand for an ‘austerity budget’. Despite this, the ANC demonstrated its political acumen by winning the support of a slew of smaller parties to get the fiscal framework through parliament by 194 votes to 182. The DA has filed papers in court to challenge the vote, claiming it was ‘procedurally flawed‘.
Professor William Gumede, an academic at Wits University’s school of governance, stated that it is unclear whether the DA will 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.‘
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. South Africa’s business sector lobbied the two parties to enter into a coalition, seeing it as the best option to guarantee economic stability.
The South African coalition government is a parliamentary system where multiple parties form an alliance to govern the country.
This arrangement was established after the 2019 general election, which resulted in no single party securing a majority.
The Democratic Alliance (DA) and the Economic Freedom Fighters (EFF) formed a coalition with several smaller parties to elect Cyril Ramaphosa as President.
The government is characterized by power-sharing agreements, joint decision-making, and cooperation between parties on key policy issues.
However, 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‘. The ANC took an equally tough stand, with its parliamentary chief whip, Mdumiseni Ntuli, accusing the DA of ‘complete betrayal‘.
The dispute over the budget is the latest sign of the sharp differences between the two parties. The DA has taken the budget as an opportunity to make a big impact, and to show it is pro-poor. Professor Gumede stated that the ANC would find it difficult to convince the public to pay more taxes when public services were crumbling.
The dispute over the budget is also having economic consequences. The Trump administration has 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. Many South Africans are calling 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%.
South Africa is a significant economic player in Africa, with a diverse economy driven by mining, manufacturing, and financial services.
The country has the second-largest economy on the continent, after Nigeria.
In 2020, South Africa's GDP was approximately $283 billion, accounting for about 25% of Africa's total GDP.
The service sector contributes significantly to the economy, employing over 50% of the workforce.
