For the first time since the end of apartheid in 1994, South Africa’s annual budget presentation has been postponed. The delay comes amid internal conflicts within the coalition government, particularly over a proposed increase in the Value-Added Tax (VAT).
VAT Hike Sparks Political Rift
The ruling African National Congress (ANC) proposed raising VAT from 15% to 17% to address the country’s mounting debt. However, this move met strong opposition from the Democratic Alliance (DA), a key coalition partner, along with other parties within the unity government.
Economists and coalition partners were caught off guard by the proposal. Critics argue that a VAT increase disproportionately impacts low-income citizens, intensifying the cost-of-living crisis already burdening millions of South Africans.
Opposition Voices Concerns
DA leader John Steenhuisen expressed his party’s firm opposition to the tax increase. In a statement released on February 19, he described the move as an unfair burden on struggling households.
Meanwhile, Julius Malema, leader of the Economic Freedom Fighters (EFF), suggested an alternative approach—raising corporate taxes and introducing a wealth tax on property. The DA, known for its pro-business stance, rejected this proposal. Malema further accused the DA of political maneuvering rather than genuine concern for taxpayers.
Government Seeks Alternative Revenue Sources
Beyond the VAT debate, South Africa’s treasury must find alternative revenue streams to fund critical projects, including the country’s green energy transition and efforts to end rolling blackouts.
Finance Minister Enoch Godongwana acknowledged that the budget delay was due to broader fiscal disagreements. The government is now weighing three options: increasing borrowing, cutting expenditures, or raising taxes in other areas to meet its financial obligations.
Diplomatic and Economic Pressures Mount
The budget impasse coincides with a diplomatic crisis that has further strained South Africa’s economy. The United States recently announced aid cuts following the enactment of a controversial land reform law that allows the government to seize land without compensation under limited circumstances.
The DA has challenged the law in court, arguing that it violates constitutional property rights. This has fueled tensions within the coalition, as the ANC remains committed to addressing historical land dispossession.
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Coalition Under Strain
The budget delay exposes deeper divisions within South Africa’s 10-party coalition government. The EFF, while not part of the coalition, argues that the land reforms do not go far enough. The uMkhonto weSizwe (MK) party, led by former President Jacob Zuma, has also pushed for an expedited land redistribution process.
MK recently took legal action against Afrikaner lobby group AfriForum, accusing it of spreading misinformation that influenced the U.S. aid cuts. AfriForum rejected these claims, blaming the ANC’s policies for attracting international scrutiny.
Impact on Education and Language Policies
Beyond taxation and land reform, another policy issue adding to tensions is the Basic Education Laws Amendment (BELA) Act, which shifts control over school language policies from local communities to the national government.
Passed in September 2024, the act aims to dismantle Afrikaans-language exclusivity in schools, but opponents argue it threatens the language’s survival.
AfriForum and the DA have vowed to challenge the act, claiming it discriminates against Afrikaans speakers. The debate over education policy further complicates the coalition’s efforts to present a united front on fiscal matters.
Uncertain Path Forward
As the government struggles with tax policy, economic pressures, and coalition disputes, the budget delay adds uncertainty to South Africa’s financial planning. Business leaders warn that political instability could harm investor confidence at a critical time for the economy.
Finance Minister Godongwana is expected to present a revised budget on March 12. Until then, South Africa’s fiscal future remains uncertain, with key decisions on taxation and expenditure still unresolved.
