Political infighting threatens to derail SA’s budget over VAT hike

For the first time in the democratic South Africa, a proposed government budget may not be passed because of political infighting centred around the contentious proposed increase of value-added tax (VAT).

Facing off against a growing anti-VAT movement which crosses the ideological divide, Finance Minister Enoch Godongwana will need to convince the National Assembly and the National Council of Provinces to pass the government’s revenue and spending plan for 2025-26.

However, the process will, for the first time, not be a rubber stamp process as in previous years, because the ANC no longer has a parliamentary majority.

As it stands, the ANC needs the support of its government of national unity (GNU) partners to secure enough votes to pass the budget through both houses of parliament.

There is a widespread feeling among political parties that a gradual increase of VAT from 15% to 16% will be completely rejected when the budget is voted on in parliament.

It is a result that will force the finance minister to go back to the drawing board to try other means of revenue collection.

But the rest of the budget is likely to be given the go-ahead.

Possible opposition

Efficient Group chief economist Dawie Roodt predicted the budget might not be passed.

ALSO READ: Budget speech hard on consumers with taxes

“Clearly, other political parties are not going to support this. I think in two to three weeks’ time, we are going to be back in parliament with another budget,” Roodt said.

The GNU comprises 10 parties: ANC, DA, Inkatha Freedom Party (IFP), Patriotic Alliance (PA), Pan African Congress (PAC), Freedom Front Plus (FF Plus), Rise Mzansi, United Democratic Movement (UDM), Al Jama-ah and the Good Party.

Together, these parties hold 285 of the 400 seats in Parliament.

Despite the GNU’s overall majority, passing the budget requires a simple majority of 201 votes.

Without the DA’s backing, the ANC would need to seek support elsewhere.

DA, EFF and MK opposition

DA leader John Steenhuisen said: “We are voting against all the budget instruments unless there is an agreement.”

There has been speculation that the ANC might approach the EFF for support, but party leader Julius Malema has firmly rejected the idea, citing opposition to the VAT increase.

The EFF will instead present its own proposals in the relevant parliamentary committees and lobby other parties to amend the budget.

ALSO READ: EXPLAINER: Budget speech tabled, but will it be approved without DA’s backing?

The MK party, parliament’s third-largest political grouping, has also ruled out supporting the budget.

The ANC approved Godongwana’s VAT raise.

‘Carefully measured intervention’

ANC secretary-general Fikile Mbalula said the proposed VAT increase of 0.5 percentage points this year and the same for 2026, is a “carefully measured intervention” designed to sustain government revenue without disproportionately affecting the poor.

“The ANC recognises the concerns of working-class families, which is why mitigation measures, including an expanded zero-rated VAT basket, real increases in social grants and fuel levy relief have been prioritised.”

ANC alliance partner secretary for policy and research and national spokesperson Alex Mashilo said VAT increases have a disproportionate impact on the workers and poor, inclusive of working-class women, more so on the entire bottom 40% of society.

New challenges for ANC

Prof Raymond Parsons of the North-West University Business School said now that the ANC is no longer the dominant party, the lack of GNU consensus on the budget “inevitably now presents new challenges on how it will be finalised”.

“The national budget is now a whole new ball game in SA’s political economy.

“The only way ahead for Finance Minister Godongwana is to engage in further negotiations with the key parties in parliament to try to reach sufficient consensus for a further amended budget that will ultimately command a majority vote.

ALSO READ: Budget speech too optimistic about the economy?

“These further negotiations are likely to be transactional in nature and could lay the foundation for feasible compromises.”

He warned of the setting in of “an additional layer of uncertainty into fiscal policy which SA has not experienced before” – placing “a big responsibility on the shoulders of MPs to successfully finalise the matter”.