South Africa’s finance minister, Enoch Godongwana, has warned that blocking the proposed value-added tax (VAT) hike, scheduled for May, would severely harm state finances, court documents revealed. The proposal to raise VAT by 0.5 percentage points this year, and another 0.5 next year, has sparked a standoff between the African National Congress (ANC) and the Democratic Alliance (DA).
Godongwana argued that canceling or delaying the VAT increase would cause the government to lose crucial revenue, forcing either spending cuts or increased borrowing to meet financial obligations. He stated in court papers that such a move would have “severe and far-reaching” consequences for the country’s financial stability.
While smaller parties have suggested alternative solutions, such as deeper expenditure cuts, some local reports indicated the ANC may reconsider its position on the VAT hike after facing a lack of support from coalition partners.
The National Treasury anticipates the VAT hike will generate an additional 13.5 billion rand for the 2025/26 fiscal year.