BY: Saneliso Mlambo
In a significant political development, President Cyril Ramaphosa has convened an emergency Cabinet meeting this Wednesday afternoon. This urgent assembly follows the Democratic Alliance’s (DA) declaration to Finance Minister Enoch Godongwana that it will reject the forthcoming budget if it includes an increase in Value-Added Tax (VAT).
Minister Godongwana was anticipated to announce a VAT hike of one to two percentage points during his budget speech scheduled for 14:00 today. Such an increase would elevate the current VAT rate from 15% to either 16% or 17%, a measure considered to address the nation’s strained fiscal situation.
The African National Congress (ANC), holding only 40% of parliamentary seats, requires the support of its Government of National Unity (GNU) partners to pass the budget. The DA’s firm stance against the VAT hike poses a substantial challenge to the budget’s approval. In response, President Ramaphosa has arranged for Minister Godongwana to brief leaders of the GNU political parties, aiming to align the budget proposals with the coalition’s priorities and secure the necessary backing.
The DA’s opposition to the VAT increase is rooted in concerns over the financial strain it would impose on South Africans, particularly those in lower-income brackets. DA leader John Steenhuisen has been vocal about the party’s commitment to preventing tax hikes that could exacerbate the cost of living crisis.
Adding to the pressure, trade unions such as the Congress of South African Trade Unions (Cosatu) have also expressed strong objections to the proposed VAT increase. They argue that such a measure would disproportionately affect workers and the poor, potentially pushing many into deeper financial hardship.
The urgency of the situation is underscored by the ANC’s reliance on GNU partners to pass the budget, marking a pivotal moment in South Africa’s fiscal policy and political landscape. The outcomes of today’s emergency Cabinet meeting and subsequent budget speech are poised to have far-reaching implications for the nation’s economic direction and the stability of its governing coalition.