The budget speech was delayed until March 12 because the GNU cabinet couldn’t agree on raising VAT by two percentage points. This led Speaker of Parliament Thoko Didiza to cancel Finance Minister Enoch Godongwana’s 2025 budget address on Wednesday.
Originally, Godongwana proposed increasing VAT to 17% starting April 1st, which was more than the expected one percentage point increase leaked before the budget. This move faced strong opposition from key GNU members, the Democratic Alliance, and allies like the Congress of South African Trade Unions and the South African Communist Party.
Godongwana criticized the leak, blaming a cabinet member, and clarified that the cabinet had known about the National Treasury’s plan for two weeks before their special meeting on the 19th of February. However, the exact increase amount wasn’t disclosed. If approved, the VAT hike aims to generate an additional 58 billion rand in revenue by 2025-26, amid a revised downward estimate of 19.3 billion rand in tax revenue for 2024-25 compared to the previous budget, and an increased government deficit of 5%.
Godongwana appreciated the cabinet’s engagement in discussing trade-offs, including spending cuts, tax hikes, or increased borrowing to fund new priorities. He mentioned that further discussions will continue but without broader stakeholder involvement or a comprehensive spending review before March 12th. He also noted that there’s no specific method to break deadlocks in approving a budget, which remains a cabinet document.