South Africa's government cancels proposed VAT increase after political pressure

On Thursday, April 24, 2025, the South African government abandoned its proposal for a value-added tax increase, which was met with significant opposition from various political parties. This increase would have raised the VAT from 15% to 15.5%, affecting essential goods and services like food and electricity. Finance Minister Enoch Godongwana stated that the decision was made following extensive consultations with political parties and careful consideration of parliamentary committee recommendations. The proposed increase aimed to boost tax revenues, which were projected to fall short by approximately $4 billion. The Democratic Alliance (DA), South Africa's second-largest political party, played a crucial role in opposing the tax increase. Initially voting against the budget proposal that included the VAT hike, the DA challenged the government in court just before the cancellation was announced. Helen Zille, DA federal chairperson, declared the cancellation a victory for all South Africans, emphasizing their commitment to advocating for responsible public spending. The VAT increase had sparked considerable controversy; numerous opposition parties and civil society groups criticized it as anti-poor, particularly in a nation where over 20 million residents depend on welfare grants and the unemployment rate exceeds 32%. The cancellation reflects ideological tensions between the African National Congress (ANC) and the DA, highlighting challenges the unity government faces since its formation after the ANC lost its parliamentary majority for the first time in 1994. This incident underscores the fragile nature of South Africa's coalition government and illustrates the ongoing struggles between different political factions as they navigate fiscal policy amidst widespread economic hardship. The rise in public discontent surrounding taxation reveals broader societal concerns that the government must address to maintain stability.