GNU Budget Battle: Make or Break

31 March 2025 - What’s the current state of play on the budget and what are the implications for the ANC? What’s the state of the South African Air Force? What do looming US tariffs mean for SA’s auto manufacturers? What signals does the Trump administration’s pick of ambassador to South Africa send?

GNU Budget Battle: Make or Break

The coming days will show whether the Government of National Unity (GNU) parties have reached sufficient agreement to cross the first hurdle in the long process of passing the budget. This first step involves adopting the fiscal framework, which is meant to happen by Friday, 4 April. This hurdle is lower than the ones to come, as the quorum here is a third of the NA’s 400 members, or 134 MPs, of whom a simple majority must approve.

The key question is whether the Democratic Alliance (DA) and the African National Congress (ANC) are any closer to finding each other. In exchange for its support on the budget, the DA is reportedly demanding shared management of economic policy, with the explicit goal of lifting the GDP growth rate, currently stuck at a dismal 0.6%.

On Friday, the DA’s proposal was rejected by the ANC, bringing to an end the current round of talks. A DA negotiator took a hard line in response, saying that should the ANC pass the budget without the support of the DA, this would effectively spell the end of the GNU. The Rand weakened sharply on the news, from R18.15 to the US Dollar on Friday morning to R18.44 in the evening. Reports on Sunday suggested negotiations were continuing.

The EFF spots an opportunity

Waiting in the wings are the Economic Freedom Fighters (EFF), who are reportedly also in talks with the ANC. The EFF is in a weakened state, having shed votes in the 2024 election and lost much of its senior leadership to the uMkhonto weSizwe Party (MKP). The ANC would be throwing the EFF a much-needed lifeline by inviting it into government, one for which the EFF in its diminished state would likely be willing to make concessions which previously it would not.

However, inviting the EFF into government would mean bringing in a disruptive and aggressive rival. It would also intensify the ANC’s race-nationalist and anti-growth tendencies, which would not be well received by markets or by voters. Given that the ANC is itself weakened, it would risk hastening its own decline by joining hands with the EFF.

An existential choice for the ANC

The ANC finds itself in a quandary. It is being confronted with a fact it was mostly able to ignore during the first nine months of the GNU: that by losing its majority in the 2024 elections, it also lost its scope for autonomous action. On issues like the budget, it is now dependent on the cooperation of others. The party knows that whomsoever it chooses to partner with is aware of this and will exploit it. That makes the choice of the right partner a vitally important one for the ANC – one that could become existential over the medium term.

South African Air Force in dire straits

A News24 report on 24 March claimed that the South African Air Force (SAAF) had only six working aircraft, out of a fleet of 331 craft. Analysts writing on DefenceWeb, a military news portal, have pushed back against this claim, saying that the fleet size was closer to 150-200 and that the number of working aircraft changed weekly as some were repaired and others broke down. They said the availability rate was at an average of 15-20% over a year. However, they confirmed that the SAAF was facing a “severe operational crisis, with aircraft availability at critically low levels across all divisions”.

One of the main causes for the South African National Defence Force’s (SANDF) weakness is persistent underfunding, which will not change while the economy is not growing and while the state remains overindebted and overfocused on redistribution.

Critically, only two of South Africa’s 11 locally produced attack helicopters, the Rooivalk, are in working order. These are quality equipment and are a major force multiplier for the SANDF. They were used effectively in the 2013 intervention in the eastern Democratic Republic of Congo against M23. Similarly, none of the five C-130 Hercules aircraft, needed for strategic and tactical airlift and humanitarian operations, are currently available.

The upshot is that South Africa’s air force is currently unable to fulfil its role in providing air support or airlift power for use in transport and rescue. Not having a functioning air force undermines South Africa’s national interests and weight in the region, as well as its leverage on the global stage. South Africa’s military capacity is seriously compromised, and South Africa’s hard power has all but collapsed.

At the same time, news reports last week suggest that the United States is cutting military ties with South Africa and expelling its military attaché, as well as requiring SA military personnel in the US for training to be returned to South Africa as soon as possible. This is partly due to South Africa’s close relationship with China, Iran, Russia and Hamas, as well as its decision to spearhead a case against Israel at the International Court of Justice.

Automotive sector exposed

A new US tariff regime expected to come into force on Wednesday, 2 April, could override the benefits South Africa’s auto manufacturers currently enjoy under the African Growth and Opportunity Act (AGOA), including tariff-free access to US markets.

Under the new system, a 25% tariff will be charged on imports of vehicles and light trucks to the US. To justify this, US President Donald Trump invoked Section 232 of the 1962 Trade Expansion Act, which allows the president to impose tariffs upon recommendation by the Secretary of Commerce if imports are considered to threaten national security. Section 232 overrides existing trade agreements, which presumably includes AGOA.

In 2023, South Africa’s exports of vehicles and auto components to the US represented around 10% of its total automative exports by value (R27.9 billion of R270.8 billion), and 6.5% by volume (25,553 vehicles of 390,884 exported). This made the US the third-largest destination for South Africa’s automotive exports, behind Germany and Belgium. Over 600,000 people are formally employed in the automotive value chain.

Local manufacturers, including industry bodies such as the Automotive Business Council (naamsa), should plan for a post-AGOA future. Those plans should include proposals to the US for mutually beneficial manufacturing investment plans, possibly as part of a bilateral trade agreement. The industry should not wait for South Africa’s AGOA participation to be cancelled or for the South African government to act (or offer more subsidies) but should instead be proactive in developing new investment and export markets outside the US.

Pick of US ambassador to SA sends a signal

Mr Trump’s pick for US ambassador to South Africa, Leo Brent Bozell III, confirms that the Trump administration will continue its hardline approach to South Africa. Mr Bozell is a conservative activist and the founder of the Media Research Center, which aims to identify liberal media bias. South Africa’s media outlets and the government should steel themselves for robust engagements ahead. The incoming ambassador is also a staunch supporter of Israel. From CRA executive director Chris Hattingh’s recent time in Washington, DC, South Africa’s ongoing case against Israel at the International Court of Justice is a major cause of the current tensions between South Africa and the US.

Mr Bozell will place little stock in South-South solidarity, the “Global South” and other vibes-based phenomena on which South Africa has tried to style its global positioning. There will be plentiful opportunities for disagreement between Mr Bozell and his host country if the ANC continues to present itself and South Africa as a leading moral superpower in the face of much local evidence suggesting otherwise.