Shift in Power Dynamics: ANC's Declining Dominance in Policy-Making and Its Impact on Investor Confidence

The recent decision to delay the annual budget announcement has emerged as a significant indicator of shifting power dynamics within South Africa's government of national unity (GNU). Experts argue that this postponement not only undermines investor confidence but also signals the waning influence of the African National Congress (ANC) over national policy-making.

Historically, the ANC has been the central force in South African politics, often directing the legislative agenda with little resistance from opposition parties. However, according to political economy analyst Daniel Silke and independent political analyst Sandile Swana, the recent developments suggest a profound transformation in political interactions, particularly with the Democratic Alliance (DA) beginning to challenge the ANC’s dominance effectively.

The crux of the issue lies in the proposed tax adjustments, notably a 2% increase in VAT, advocated by the ANC but strongly opposed by the DA. The disagreement highlights a broader conflict within the GNU, stemming from the ANC’s deviation from prior commitments to keep taxes steady — commitments influenced by major business entities like Business Leadership South Africa (BLSA). The ANC's departure from these agreements has spurred significant backlash not only from political opponents like the DA but also from allies such as the Congress of South African Trade Unions (Cosatu).

This newly contentious environment is markedly different from past legislative sessions where the ANC could unilaterally shape policy. The inability to unite the cabinet on crucial fiscal strategies such as tax increases reflects a fragmented government that struggles to align its constituents and policy directions. This disunity was glaringly apparent in the lead-up to the budget announcement, where the lack of consensus forced a postponement until middle March to allow more time for negotiation and to seek viable alternatives that could win broader support within the GNU.

The implications of these developments are manifold. Economically, the uncertainty and perceived instability may deter investment and exacerbate existing financial challenges, undermining efforts to rescue state-owned enterprises like Eskom and Transnet which are already in precarious positions. Politically, this situation amplifies the influence of smaller parties and gives them leverage over key legislative outcomes, a new reality that the ANC may find challenging to navigate.

The ongoing situation is a litmus test for the ANC’s adaptability and could redefine South African politics. As the budget deliberations continue, the ability of the ANC to broker compromises and manage the legislative agenda will be critical in determining not just economic stability but its own political future in a rapidly evolving governance landscape.