(Africanews) – Weeks after it was initially due, South Africa’s Finance Minister, Enoch Godongwana, finally delivered the national budget announcement on Wednesday.
However, one of the most contentious issues remains unresolved—a proposed increase in value-added tax (VAT), which several political parties within the coalition government argue will disproportionately impact the poor.
“To raise the revenue needed, the government proposes to increase the VAT rate by half a percentage point in 2025/26, and by another half a percentage point in the following year. This will bring the VAT rate to 16 percent in 2026/27,” Godongwana stated.
This revised increase is half of what was initially proposed three weeks ago but still faces strong opposition from multiple parties.
Among the key highlights of the budget were a slightly improved economic growth forecast, a narrowing fiscal deficit, and increased infrastructure spending.
“As much as the debate has been dominated by the proposed increase to value-added tax, the bigger debate must be about how we grow the economy for the benefit of all South Africans,” Godongwana said.
“A bigger, faster-growing economy and the larger fiscal resources that come with it would give us more fiscal room to meet more of our developmental goals. But the truth is that our economy has stagnated for over a decade.”
The divisions over the budget mean that Godongwana will need support from a broad coalition of political parties to secure approval for the revised version.
The Democratic Alliance, the second-largest party in the coalition and a strong opponent of tax hikes is pushing for a complete restructuring of government spending.
The budget represents the most significant challenge yet for the fragile coalition government, which was formed after the African National Congress (ANC) lost its parliamentary majority for the first time since the end of apartheid in 1994.
A final vote on the budget is expected towards the end of May.
