Terrance Molobela
The reversal of the proposed 15,5% hike in value-added tax (VAT) came as a big relief to poverty-stricken South Africans, who were about to be charged R15,50 for every R100 spent, starting on 1 May 2025.
VAT remains unchanged, though Enoch Godongwana, finance minister, announced the first rate increase of 0,5% would apply from
1 May with the second hike of 0,5% from 1 April 2026.
The media coverage of the controversy on the VAT increase has been extensive, with rage and concerns from various impoverished communities across the country.
The people held a strong view they were punished by the Government of National Unity (GNU), as the increase would add to deep-rooted socioeconomic problems like inequality, high unemployment rate and poverty.
The unprecedented decision to cancel VAT was owing to immense additional pressure from political parties, who took the legal route to stop the GNU implementing the VAT increase.
According to the National Treasury, the initial proposal to hike the VAT rate was motivated by the urgent need to restore and replenish the funding of critical frontline services that had suffered reductions necessitated by the country’s constrained fiscal position.
People need to understand that once the budget is passed by parliament, the minister cannot unilaterally reverse the VAT increase. This is cemented by Section 30(2) of the Public Finance Management Act and Section 7(4) of the VAT Act.
Despite the GNU deadlock and its fiscal crisis, several members within the ANC have unanimously admitted that the party has grossly failed to reach an amicable consensus to freely support the VAT hike. It is unclear as to where and how Godongwana would find the money to plug the fiscal gap.
What is clear is that the 0,5% increase would add distress to households already struggling to deal with the increased prices of goods, services and essentials. More tax would kill jobs, resulting in reduced revenue generation by government.
To avoid further inflationary hikes, the government needs to place strict rules and regulations on any government transaction that takes effect, and deal with corruption and mismanagement in every sphere of government.
The government needs to change its ways of approaching industries, companies, and businesses to create jobs, and transfer some of their skills to the people of South Africa. Youths yearn to be seen, supported, trained, and placed into the real world to unleash their potential, which might be something the economy needs to re-establish and position itself in the right direction to stir the desired economic growth.
In dealing with the functionality of the GNU, both the ANC and DA knew ahead of time that forming the GNU with other parties this was what is commonly known as “a marriage of inconvenience”. You create this beautiful picture that only exists in your head, and hope that the other party shares a similar picture. But after you have entered the marriage, you then realise that you each function on different levels and do not have complementary ideologies.
The DA’s ideologies on governance and policy are the opposite of the ANC. In this GNU marriage, the ANC has demonstrated their thirst for power and control, hence, their ability to share power equally remains a foreign language. The ANC-led government, through coalescing with parties like Action SA, secured majority support for the approval of the fiscal framework.
However, parties such as the DA, EFF, and uMkhonto weSizwe (MK) have rejected the budget. The DA leader John Steenhuisen stated clearly that they would not sacrifice citizens’ votes, but would rather support a budget that caters for economic growth and job creation.
With the VAT being suspended, this may have provided the party with a strong political footing for the upcoming elections.
■ Molobela is a lecturer in the Department of Public Administration and Management at the University of the Free State (UFS).
