South Africa: Vat Dispute, Coalition Tensions Force South Africa Budget Delay

GCIS
South African Finance Minister, Enoch Godongwana
20 February 2025
Daba Finance (Abidjan)

TLDR

  • South Africa postponed its annual budget presentation after a dispute over a proposed two-percentage-point increase in value-added tax
  • The delay marks the first time in South Africa's democratic history that a budget has been postponed due to internal disagreements
  • The ruling African National Congress (ANC), which lost its parliamentary majority in 2024, now relies on coalition partners to pass fiscal measures

South Africa's government postponed its annual budget presentation after a dispute over a proposed two-percentage-point increase in value-added tax (VAT) to 17%.

Finance Minister Enoch Godongwana had signaled the need for a tax hike but withheld details until hours before his scheduled speech, triggering backlash within the coalition government. The delay marks the first time in South Africa's democratic history that a budget has been postponed due to internal disagreements.

The ruling African National Congress (ANC), which lost its parliamentary majority in 2024, now relies on coalition partners to pass fiscal measures. The Democratic Alliance (DA) opposed the VAT increase, calling it harmful to the economy.

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Key Takeaways

The budget dispute underscores the fragility of South Africa's 10-party coalition government. Fiscal challenges, including rising debt and spending pressures, require difficult trade-offs between borrowing, expenditure cuts, and tax hikes. The delay follows U.S. President Donald Trump's decision to cut U.S. aid to South Africa, further straining public finances. Investors and businesses have raised concerns about policy uncertainty, with the Black Business Council warning of negative market reactions. The ANC and DA remain divided on key policies, including land expropriation and education reforms. The government must navigate coalition tensions while addressing economic stagnation and a widening fiscal gap. The rescheduled budget, expected next month, will test the administration's ability to deliver a credible economic plan.

Read the original article on Daba Finance.

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