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South Africa's Budget Faces Uncertainty Over VAT Hike Disputes

Finance Minister Enoch Godongwana's revised budget, proposing a smaller VAT increase, struggles to gain parliamentary support from coalition parties.

South Africa's Finance Minister Enoch Godongwana delivers his 2025 budget speech in Cape Town, South Africa, March 12, 2025. REUTERS/Esa Alexander/File Photo
South African President Cyril Ramaphosa answers lawmakers' questions at the parliament in Cape Town, South Africa, March 11, 2025. REUTERS/Esa Alexander
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The new budget proposed by South African Finance Minister Enoch Godongwana was booed in parliament

Overview

  • South Africa's finance minister scaled back a proposed VAT hike from 2 percentage points to 1 point, spread over two years, in an effort to secure parliamentary approval.
  • The Democratic Alliance, a key coalition partner, remains opposed to any tax increases, creating a major hurdle for the budget's passage.
  • The revised budget includes over one trillion rands in spending on critical infrastructure projects, including energy, transport, and water systems, over three years.
  • Finance Minister Godongwana emphasized that cutting the VAT hike would require lawmakers to specify alternative expenditure cuts to address the nation's fiscal challenges.
  • The budget marks a significant test for South Africa's fragile coalition government, formed after the ANC lost its parliamentary majority for the first time since apartheid.