Plans to raise South Africa’s value-added tax (VAT) have been abandoned on April 24 by the Finance minister, following intense opposition from coalition partners.
The proposal, which would have increased VAT by 0.5 percentage points to 15.5%, was initially justified as a necessary step to address a deepening financial crisis. However, resistance from key political allies, particularly the Democratic Alliance (DA), created the risk of a parliamentary defeat of the national budget, prompting the retreat.
The decision to scrap the VAT increase was seen as a political compromise to maintain the fragile unity of the coalition government. Pressure had been mounting, not only from within the governing alliance but also from trade unions, opposition parties, and even within the government’s own tax agency. Fears that the proposed increase would disproportionately affect the poor contributed to widespread rejection. With the threat of a government collapse looming, the African National Congress (ANC) was compelled to concede, though it publicly denied succumbing to pressure.
Public reaction to the reversal has been marked by relief, particularly among economically strained households. The ANC’s declining electoral support, evident in last year’s historic loss of its parliamentary majority, has been further tested by the budget standoff. While the DA hailed the outcome as a victory for economic justice, critics, including the Economic Freedom Fighters (EFF), labelled the episode a “budget fiasco” and called for the finance minister’s resignation. As spending plans are now re-evaluated, the ANC faces a renewed challenge to restore confidence in its leadership and economic strategy.