South Africa’s Finance Minister Enoch Godongwana withdrew the proposed VAT increase on Thursday, April 24th, after extensive negotiations within the Government of National Unity (GNU). The decision came after consultations among the African National Congress (ANC) and other political parties, which sought a solution that would avoid further economic strain on the country’s lower-income citizens. The decision also prevented a parliamentary vote against the national budget.
The proposed increase from 15% to 15.5% aimed to raise additional revenue to support public services, including education and health. However, following growing opposition within the coalition, the ANC and its allies agreed to revise the measure, deciding that it would be best to leave the VAT rate at 15%. This change was presented as a result of constructive negotiations between the ANC and other coalition partners, rather than solely as a response to opposition from the Democratic Alliance (DA).
The DA had rejected the VAT hike and argued it would harm lower-income citizens the most, but the ultimate decision was made through broader discussions within the coalition and outside political parties. The ANC’s Fikile Mbalula stated that the decision was reached through cross-party consensus, emphasizing the need to balance fiscal stability with the protection of the working class.
Following the policy reversal, the South African rand remained stable as financial markets awaited further clarity on adjustments to the national budget. The finance ministry confirmed that other expenditure decisions would be reviewed, and measures initially planned to cushion lower-income households from the VAT hike would now be scrapped. Analysts noted that while currency stability was maintained, fiscal uncertainty persisted.
The ANC, which lost its parliamentary majority for the first time since 1994, now relies on coalition support. The DA welcomed the VAT reversal, asserting its role in protecting economic interests, but the DA’s opposition was not the sole driver of the policy change. The party declared, “We opposed the unjust VAT hike from day one—and South Africa won.”
Critics, including the Economic Freedom Fighters (EFF), described the situation as a “budget fiasco” and called for Godongwana’s resignation. However, the ANC denied yielding to pressure, emphasizing that the decision reflected a collective, cross-party approach to governance. The withdrawal of the VAT increase also led to the cancellation of support measures linked to the tax hike, complicating efforts to balance the budget.
