The ANC appears ready to abandon its proposed 0.5% VAT increase following fierce opposition from its Government of National Unity (GNU) partners, including the DA, The Sunday Times can reveal.
Budget U-Turn: Key Details
- Original Plan: Finance Minister Enoch Godongwana initially proposed a 2% VAT hike in February, later reduced to two 0.5% increases over two years.
- GNU Resistance: The DA and other parties refused to support any VAT rise, forcing the ANC to reconsider.
- May 1 Deadline: Businesses had already begun invoicing at the new 15.5% rate, but the hike may now be scrapped entirely.
- R13.5bn Budget Gap: Dropping the tax increase leaves a major revenue shortfall, pushing Treasury to find alternatives.
Why This Matters
- Political Tensions: The dispute pushed the GNU to the brink, with ANC leaders accusing the DA of “defining itself out” of the alliance.
- Economic Impact: Reversing the hike could prevent consumer price surges but complicates South Africa’s fiscal stability.
- Last-Minute Talks: The Sunday Times reports that a recent ANC-DA meeting sealed the VAT hike’s fate, with “zero support” left in Parliament.
What’s Next?
With the May 1 deadline looming, Godongwana must now:
- Formally withdraw the VAT proposal.
- Find alternative revenue sources to cover the R13.5bn gap.
- Secure GNU consensus to pass the revised budget.
An ANC insider told The Sunday Times:
“The VAT increase is dead. Treasury must find another way—R13bn is nothing in the bigger scheme.”
