(Bloomberg) — South Africa’s rand and bonds weakened after parliament delayed the presentation of the annual budget, an unprecedented decision that highlighted increasing strains in the nation’s coalition government.
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“There has not been agreement in terms of parties in the executive to actually find one another in proposals of the budget,” Speaker of Parliament Thokozile Didiza told lawmakers in Cape Town on Wednesday.
Finance Minister Enoch Godongwana had been scheduled to deliver his budget at 2 p.m. It will now be presented on March 12, he told reporters at a briefing.
The Democratic Alliance — the second-biggest party in the ruling coalition — said earlier on Wednesday that it would hold a briefing after Godongwana’s planned speech to discuss its “resolute position” on the budget process after reports that the government is considering raising taxes.
The party said in a separate statement that the minister had planned to increase the value-added tax rate by 2 percentage points to 17%, which it couldn’t accept.
The rand fell as much as 1% and traded 0.8% weaker at 18.5533 per dollar by 3:19 p.m. in Johannesburg. The yield on benchmark 2035 government bonds climbed seven basis points to 10.59%.
The last-minute postponement of Godongwana’s speech came about because of the failure by the African National Congress, the nation’s biggest political party, and Godongwana “to engage meaningfully with the alternative proposals tabled by the DA,” said John Steenhuisen, the party’s leader. “We will now fight with the same vigor to introduce a new budget that is anchored in growing the economy, rather than increasing taxes or debt.”
The 10-party-coalition was formed in June last year, a month after the African National Congress lost its parliamentary majority for the first time since it took power in 1994. While the alliances agreed to prioritize growing the economy, its members have clashed over education policy, a new land expropriation law and the ANC’s plans to introduce a national health insurance program.
Brinkmanship
Godongwana’s failure to win approval for his planned tax increases are a blow to his efforts to rein in state debt, which he has repeatedly said has reached unsustainable levels.
