Political Uproar and Postponement: The Stalled VAT Increase in South Africa’s Budget Saga

In a dramatic turn of events that underscored the fragility of South Africa's Government of National Unity (GNU), the proposed increase in the Value-Added Tax (VAT) from 15% to 17% stirred a significant revolt amongst coalition parties, culminating in the historic postponement of the 2025/26 National Budget speech. This would be the first such delay since the dawn of democracy in 1994—a symbolic year for South Africa.

Finance Minister Enoch Godongwana's last-minute disclosure of the VAT hike plan to his GNU partners only hours before the scheduled budget presentation caught the members off guard, sparking immediate backlash. The implications of the proposed increase were profound, targeting a society already grappling with high unemployment and escalating living costs. This move was perceived as an additional burden on the approximately 30 million South Africans living below the poverty line.

The fierce opposition was not just about the tax itself but also reflected deeper issues of trust and communication within the coalition government. The Democratic Alliance (DA), the second largest party in the GNU after the ANC, and other parties like the FF Plus and UDM criticized the lack of consultation, marking a significant governance failure.

Finance Minister Godongwana attempted to justify the proposal during a press briefing, suggesting that VAT increase discussions had been part of earlier Cabinet meetings. However, the exact figures and the sudden formal introduction of such a critical fiscal change were not adequately communicated to the coalition parties.

The postponement of the budget not only reflects the discord within the GNU but also highlights the complex dynamics of governing a coalition with diverse political agendas. The current impasse represents a critical test of the GNU’s ability to navigate through internal differences and make unified decisions that affect the nation's economic trajectory.

As South Africa now looks towards the rescheduled budget announcement on 12 March 2025, the GNU must find a way to bridge its divides. The upcoming month is crucial for the coalition to streamline its communication and decision-making processes to avoid further undermining public and investor confidence in its governance capabilities.