from DION HENRICK in Cape Town
Western Cape Bureau
CAPE TOWN, (CAJ News) – A WAR of words has ensued between the major parties in the coalition government of South Africa, with the emotive issue of tax increases this time fuelling the fallout.
The differences are the latest spat, which culminated in the country for the first time since independence in 1994 deferred the presentation of the Budget Speech.
This follows differences among the rival issues on the case of taxation but on Wednesday, Finance Minister Enoch Godongwana, presented the divisive budget, and the tensions were evident, especially between the biggest members, the African National Congress (ANC) of President Cyril Ramaphosa, and the Democratic Alliance (DA) led by John Steenhuisen.
He said in light of new and persistent spending pressures in health, education, transport and security, the government had decided to raise value-added tax (VAT) by 0,5 percentage points in each of the next two years, which will bring VAT to 16 percent in the 2026/27 financial year.
The first 0 increase in the VAT rate will take effect on May 1, 2025 and the second on April 1, 2026.
“This decision was not made lightly. No Minister of Finance is ever happy to increase taxes,” Godongwana told legislators.
“We are aware of the fact that a lower overall burden of tax can help to increase investment and job creation and also unlock household spending power.”
Godongwana, presenting the first budget since the new government of national unity (GNU) came into power in 2024, said he had to “balance this knowledge against the very real and pressing service delivery needs that are vital to our developmental goals and which cannot be further postponed.”
However, the DA immediately responded, negatively.
“The DA will not support this budget,” said Steenhuisen, Leader of the DA, who is also the Agriculture minister in government.
“The DA made it clear to the ANC in the GNU that we would not support any increase in taxes, unless those increases were temporary, and the ANC agreed to a series of major reforms that would grow the economy, create jobs, reduce waste and bring down taxes within three years.”
“The ANC refused to agree to these measures, and instead insisted on two likely permanent VAT increases, which cumulatively will increase VAT by 1 percent over the next two years,” Steenhuisen said.
He added: “DA believes as a consequence, the people of South Africa will be poorer, and the future of the government is at risk.”
Steenhuisen argued the underlying problem is that the ANC has “still not accepted the outcome of the general election” and cannot bring itself to share power.
For the first time since independence in 1994, ANC lost its majority, dropping to 40 percent, and was forced into coalition with a number of parties in an arrangement also known as government of national unity (GNU).
“The ANC VAT budget doesn’t have a majority, and the DA won’t give it one. It is now up to the ANC to fix the mess it has created,” Steenhuisen said.
ANC is not impressed by such sentiments, with ANC Secretary-General, Fikile Mbalula singled out the DA.
“As expected, the DA has once again revealed its anti-transformation agenda by opposing this progressive budget proposal,” he said.
Mbalula argued their opposition is not based on concerns for fiscal responsibility but is instead a desperate attempt to undermine transformation, protect white monopoly capital, and roll back the democratic gains made over the past three decades.
“The DA seeks to use the budget process as leverage to renegotiate its role within the GNU, not because it has the interests of the people at heart, but because it is determined to advance an agenda that prioritises privilege over progress.”
The National Treasury believes VAT is an efficient source of revenue. This latest increase is projected to add a net R11,5 billion in 2025/6 (about US$626,4 million).
The last time VAT was raised was in 2018 when it increased from 14 percent to 15 percent.
The parties in the coalition have fallen out over a number of issues on transformation of the economy from the hands of the minority white, land reforms and the foreign policy.
– CAJ News