Photos: YouTube Screenshots\Wikimedia Commons
South African businesses are grappling with uncertainty around the government’s economic plans after the unprecedented postponement of the budget this week.
Finance Minister Enoch Godongwana on Wednesday delayed his budget speech until Mar. 12 after the Democratic Alliance, a main coalition partner of the African National Congress, opposed plans to increase value-added tax to 17% from 15%. The government wants to spark growth in Africa’s most advanced economy without increasing borrowing — public debt is now 75% of GDP, compared to 27% in 2008 — but VAT has become a major sticking point: The ANC sees the tax hike as a way to avoid future credit downgrades but the DA says it would hit the poorest South Africans struggling with the cost of living.
The row marks the biggest policy disagreement since the ANC was forced into a coalition last year. And, with South Africa’s tax year set to start on Mar. 1, businesses lack finality around the government’s plans. “Uncertainty is something we can ill afford,” said Khulekani Mathe, CEO of the Business Unity South Africa organization, an employers’ group. He added that the delay casts doubt on the coalition’s “ability to collaborate effectively.”
Read on to find out why the coalition’s honeymoon ended. →
