SA Finance Minister Re-tables Budget, Drops VAT Hike Amid Coalition Pressure and Public Backlash

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On Wednesday, South African Finance Minister Enoch Godongwana reintroduced the 2025 national budget to Parliament, officially withdrawing the controversial proposal to raise the value-added tax (VAT). The revision underscores the government’s renewed focus on social welfare and infrastructure-led growth, while adhering to a course of fiscal consolidation.

The re-tabling follows a three-month delay caused by internal discord within the ANC-led coalition, particularly over the VAT proposal first announced in March. The now-abandoned plan aimed to raise VAT incrementally from 15% to 16% by 2026/27. However, strong political opposition—led by coalition partners and the Economic Freedom Fighters (EFF), who mounted a legal challenge citing the regressive impact on low-income earners—forced the ANC to retreat.

Godongwana, addressing the National Assembly, emphasised that the reversal reflects the government’s responsiveness to both public sentiment and parliamentary voices. “This decision demonstrates our commitment to listening to South Africans and all the political parties represented in this House,” he said, confirming that VAT will remain at 15%.

To compensate for lost revenue, the minister announced inflation-linked adjustments to fuel levies, presenting a less socially burdensome alternative. Meanwhile, economic growth forecasts have been revised downward, with GDP now projected at 1.4% for 2025, down from 1.9%, rising gradually to 1.8% by 2027.

Government debt is expected to stabilize at 77.4% of GDP, slightly higher than previously forecast. Nonetheless, the Treasury remains committed to achieving a primary surplus by reining in expenditure growth.

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The revised budget maintains key social commitments, including the extension of the Social Relief of Distress Grant and incremental increases to other social grants. It also reiterates the state’s R1 trillion investments in infrastructure over three years to boost long-term economic performance. Godongwana described the updated budget as one that “supports economic activity while raising future economic prospects… and invests in state capability and critical infrastructure, all the while promoting fiscal sustainability.”

Ultimately, the re-tabled budget reflects a strategic political recalibration for the ANC amid a fractious coalition and heightened public scrutiny, aiming to balance economic responsibility with social equity.