South Africa’s Finance Minister, Enoch Godongwana, unveiled a revised budget on Wednesday, scaling back a previously proposed value-added tax (VAT) increase.
However, the plan was met with strong opposition, particularly from a key party in the country’s unity government.
The new proposal suggests a staggered VAT hike, raising it by one percentage point to 16% by the 2026/27 financial year.
The increase will be implemented in two phases: a 0.5% rise in 2025/26, followed by another 0.5% the year after.
Despite the smaller increase, several parliamentarians booed the announcement, and the Democratic Alliance (DA), a major player in the government, immediately rejected the budget.
“We will continue to fight for economic growth and jobs,” DA leader John Steenhuisen declared.
Godongwana defended the tax policy, stating that increasing corporate or personal income tax would harm investment and job creation.
He argued that VAT, while affecting everyone, is a necessary measure to finance crucial public services.
South Africa’s economy, the most industrialised on the continent, remains weighed down by a sluggish 0.6% growth rate in 2024, soaring unemployment of over 32%, and widespread inequality.
Around two-thirds of the population live in poverty, according to World Bank estimates.
The budget allocates over one trillion rands ($54.4 billion) over three years to improve infrastructure, energy supply, and public services. It also boosts funding for tax authorities to recover billions in uncollected revenue.
However, the DA warned that the plan would leave South Africans poorer and put the unity government at risk.
The party has vowed to withhold its support, casting doubt on whether the budget can secure the parliamentary majority needed for approval.
