South African Finance Minister Proposes 0.5% VAT Hike on May 1 Amid Governing Coalition Impasse

South African Finance Minister Enoch Godongwana has stated that a 0.5 percentage point hike in Value Added Tax (VAT), set to come into effect on May 1, is necessary to resolve a budget impasse that threatens the stability of the country's governing coalition. The proposed VAT increase has sparked significant debate among political parties within the government of national unity. The Freedom Front Plus believes that despite the tensions, not all is lost in the discussions over the VAT impasse. Meanwhile, the Pan Africanist Congress (PAC) opposes the VAT increase but acknowledges the country's financial situation, calling for reductions in wastage, inefficiencies, and a bloated administration. Godongwana has distanced himself from the controversial VAT hike, emphasizing that the power to reverse it lies with Parliament. He also noted that various political parties' proposals on generating revenue have merit, indicating a complex landscape of fiscal policy considerations. Rise Mzansi, led by Songezo Zibi, has suggested a path that could allow the Finance Minister to withdraw the VAT increase, highlighting alternative revenue sources and the need for swift resolution to maintain national credibility and economic stability. Civil society groups argue that it is not too late for Parliament to rectify the adoption of the 2025/26 Fiscal Framework and the revenue proposals, including the VAT increase, which was passed with a slight margin earlier this month.