A number of things smell off at the moment. Such things normally resolve themselves over time, but often through unpleasant processes.

One thing that was recently resolved in an unpleasant manner was the kicking out of the SA ambassador to the US. His comments at the Mapungubwe Institute for Strategic Reflection (Mistra) seminar failed not so much the content as the smell test. They reeked of imperious lecturing and arrogance. Upon watching the recording, one is left scratching one’s head and wondering what is going on.

The point here is about trust, not content. The department of international relations and co-operation continues to struggle to generate trust with foreign capitals — not just the US — because the government continually falls back on tired ways of doing things. A new US ambassador is urgently needed who can start the long process of generating trust before substantive issues can be dealt with. President Cyril Ramaphosa’s recent utterances seem to indicate a belief that a deal somehow can be done without an initial basis of trust. This doesn’t pass the smell test either.

Another thing that smells off is the ANC’s political strategy around the VAT hike. It seems to show that the party has no money for focus grouping or polling, or indeed for internal research and strategy, that so much political capital is being used for such a small amount of money likely raised. (The Financial and Fiscal Commission echoed my concerns in parliament yesterday that there are downside risks regarding the amount collected).

Is it really worth it? This is not about technocratic fiscal policy. VAT makes sense as a simple lever that raises large amounts. The problem remains ultimately a political one — will the electorate, and particularly the ANC marginal vote, buy the story that zero rating protects the poor (it doesn’t, it shields them partly but they will still be worse off), that the VAT hike is progressive because the rich pay the most (they do in rand terms, but that is not the issue, which is what share of their income they pay in VAT), if the electorate buys the progressivist spending it’s paying for (when most goes on public-sector wages), and if the electorate buys that the DA is trying to bring back apartheid (the electorate has a range of concerns with the DA, but it’s not clear this is one of them).

The finance minister has since admitted the VAT hike proposal was a response to his colleagues wanting ever more spending. This kind of thinking is vaguely amusing, and I even have a little sympathy for it in a kind of anarchistic way as much as from a geeky fiscal/technocratic perspective. But that seems a poor basis for political decisions ahead of local elections next year, when the ANC is at serious risk.

I seem to be handing out a lot of political advice here to the ANC. It can make a donation to charity in lieu of payment if it likes. But the point is important: investors and companies are thinking a lot about the key political events of 2026/27 and 2029. The ANC does not seem to be undertaking a rational strategy that might arrest its decline. (Whether the DA can capitalise on this remains an open question with a surprising amount of uncertainty given its historic propensity to foot shoot).

Another thing that smells off is the unilateral VAT hiking powers of the finance minister. Again, technically this seems entirely positive — it secures the fiscal framework together with the rules about limiting spending when the budget laws and frameworks have not yet been passed. However, politically and constitutionally, is it really right that a VAT hike can occur without the will of parliament?

The 2018 hike was mad — it was authorised in October, though it clearly had the government’s wholehearted backing at the time. Now though, the political and legal stakes are higher, with not only the DA but also civil society threatening legal review. The committees also seem to be stirring. Again — it may or may not be entirely legally appropriate to hike VAT unilaterally, but does this make sense politically?

Perhaps the underlying question here on not just fiscal but foreign policy issues is, what is political capital spent on, and why? Ultimately, a coalition government is about several political parties coming together, understanding that while they may be quite different, they are all part of the strange and rare beast homo politicus. That each must spend its own political capital and give and take, but ultimately act in its own rational political strategic interest. In this sense coalitions are a game, but the parties all play in different ways to achieve different ends. The ANC was advised by all quarters — especially Mistra, but also by its own European-funded study tour — that real coalition agreements are a necessity.

This, then, is the final thing that smells off. The game risks severe instability without a real coalition agreement, and that will become increasingly apparent as the VAT spat leads to a waning of trust between the parties — unless it is urgently corrected. In the meantime, talks with, and threats by, the EFF sound mad considering the austerity-style cuts that would eventually be forced on a new coalition.

The coalition game ultimately allows parties to act in their self interest, but the real question is whether the ANC actually knows what that is?

• Peter Attard Montalto leads on political economy, markets and the just energy transition at Krutham, a SA research-led consulting company.

This article first appeared in Business Day.
Image Credit: President Cyril Ramaphosa by GovernmentZA licensed under CC BY-ND 2.0.