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SOUTH AFRICA: Budget Delayed As Coalition Infighting Over VAT Hike Boils Over

SOUTH AFRICA
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  • Shortly after he was supposed to start his annual Budget Speech, Finance Minister Enoch Godongwana announced that it would be postponed until March 12 after his African National Congress's (ANC's) main coalition partner Democratic Alliance (DA) threatened to vote against the proposed hike of the VAT rate by 2pp to 17%. Early signs that the ANC and its coalition partners were on collision course emerged earlier in the week in the form of reports of their conflicting views on tax increases. Apparent brinkmanship from all sides led to a failure to break the deadlock, resulting in the first Budget delay in South Africa's post-apartheid history. The decision to postpone the Budget was made to allow for a restart of intra-coalition negotiations.
  • There were divergent accounts of what led to the deadlock in intra-coalition budget talks. Minister in the Presidency Khumbudzo Ntshavheni said that ministers from the ANC were among the first to object the VAT rate hike and the decision to delay the budget was a cabinet decision, denying DA leader John Steenhuisen's claim that it was his party that stopped the planned tax increase. President Cyril Ramaphosa later called the decision "mature and collegial". Separately, a Daily Maverick source report noted that Godongwana "had presented the 2pp VAT increase to GNU partners only on Wednesday morning," with earlier discussions cantering on a 1pp increase.
  • Leaked documents showed that other planned announcements included a change to income tax brackets, an excise duty hike, or a fuel levy relief for another year. The initial proposals may now be up for renegotiation.
  • BusinessDay reported that the ANC's Chief Whip Mdumiseni Ntuli called an urgent meeting of ANC cabinet members in order to prepare for the planned talks with coalition partners aiming to resolve the budget impasse.
  • G20 Foreign Ministers or their designated representatives touch down in South Africa for a summit today. US Secretary of State Marco Rubio decided to skip the summit and an acting ambassador will participate in his stead.
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  • Shortly after he was supposed to start his annual Budget Speech, Finance Minister Enoch Godongwana announced that it would be postponed until March 12 after his African National Congress's (ANC's) main coalition partner Democratic Alliance (DA) threatened to vote against the proposed hike of the VAT rate by 2pp to 17%. Early signs that the ANC and its coalition partners were on collision course emerged earlier in the week in the form of reports of their conflicting views on tax increases. Apparent brinkmanship from all sides led to a failure to break the deadlock, resulting in the first Budget delay in South Africa's post-apartheid history. The decision to postpone the Budget was made to allow for a restart of intra-coalition negotiations.
  • There were divergent accounts of what led to the deadlock in intra-coalition budget talks. Minister in the Presidency Khumbudzo Ntshavheni said that ministers from the ANC were among the first to object the VAT rate hike and the decision to delay the budget was a cabinet decision, denying DA leader John Steenhuisen's claim that it was his party that stopped the planned tax increase. President Cyril Ramaphosa later called the decision "mature and collegial". Separately, a Daily Maverick source report noted that Godongwana "had presented the 2pp VAT increase to GNU partners only on Wednesday morning," with earlier discussions cantering on a 1pp increase.
  • Leaked documents showed that other planned announcements included a change to income tax brackets, an excise duty hike, or a fuel levy relief for another year. The initial proposals may now be up for renegotiation.
  • BusinessDay reported that the ANC's Chief Whip Mdumiseni Ntuli called an urgent meeting of ANC cabinet members in order to prepare for the planned talks with coalition partners aiming to resolve the budget impasse.
  • G20 Foreign Ministers or their designated representatives touch down in South Africa for a summit today. US Secretary of State Marco Rubio decided to skip the summit and an acting ambassador will participate in his stead.