Finance Minister Enoch Godongwana faces off with the DA as South Africa’s proposed VAT hike to 15.5% threatens to fracture the unity government
In a move sparking political tension and legal action, South African Finance Minister Enoch Godongwana has defended the proposed increase in the value-added tax (VAT) rate to 15.5% as the only viable solution to a deepening budget crisis.
Set to take effect on May 1, 2025, the 0.5 percentage point VAT hike has become the centrepiece of a fierce dispute within the Government of National Unity (GNU), threatening to splinter the fragile alliance between the African National Congress (ANC) and the Democratic Alliance (DA).
Speaking to local broadcaster eNCA on April 16, Godongwana stated, “If I had alternatives to the 0.5%, I would be second-guessing my fiscal framework. I presented a fiscal framework, and I am confident that I would not have presented it if I had alternatives.”
A Coalition Under Fire
The DA, South Africa’s second-largest party, has strongly opposed the increase, filing a court case in an effort to halt its implementation. The party maintains that the VAT hike disproportionately burdens consumers and undermines economic recovery efforts.
Despite voting against the legislation on April 2, the DA’s objections weren’t enough to stop the bill from passing after the ANC secured support from smaller opposition parties. However, the tensions have exposed serious cracks in the unity government, raising concerns among investors and rattling the South African rand.
Adding fuel to the fire, parties that supported the bill reportedly did so on the understanding that the VAT hike would be temporary or even withdrawn — a promise that remains uncertain.
READ: Ramaphosa Doubts Treasury Will Scrap VAT Increase as Budget Passes with New Revenue Plans
Legal and Political Battlelines
The DA’s legal challenge is set for April 22, and the party remains divided over whether to continue in the GNU. DA spokeswoman Karabo Khakhau confirmed, “We will be in court on Tuesday.”
The stakes are high. Scrapping the VAT increase would leave a R13.5 billion ($716 million) hole in the national budget. According to three senior ANC insiders, the National Treasury has exhausted all other options and considers the VAT adjustment non-negotiable.
Godongwana is expected to brief ANC leadership in the coming days, while DA members await the outcome of the court case before deciding their next steps. Some insiders suggest the ANC may still try to appease the DA by offering to repeal the VAT increase in 2026 and cancel an additional hike planned for April of that year.
Investor Jitters and a Shifting Political Landscape
The deadlock has left investors uneasy. The business-friendly DA’s resistance has cast doubt on the GNU’s stability, prompting speculation that the Economic Freedom Fighters (EFF) could gain influence if the DA pulls out.
With Parliament scheduled to reconvene on May 6, the ANC is betting on the DA softening its stance — or at least securing support from smaller parties such as ActionSA and Build One South Africa.
In the meantime, all eyes are on the courtroom and the political corridors of Pretoria as South Africa navigates a fiscal and political turning point. Whether the VAT hike proceeds as planned — or becomes the tipping point for a fractured government — will be decided in the weeks to come.
Also read: Ramaphosa Acknowledges Treasury’s Challenges in Reversing 0.5% VAT Increase After Budget Deal
