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South Africa’s coalition government is facing significant internal conflict over a proposed Value-Added Tax (VAT) increase, highlighting deep divisions between the African National Congress (ANC) and its main coalition partner, the Democratic Alliance (DA).
Finance Minister Enoch Godongwana has announced a plan to raise VAT from 15% to 15.5% effective May 1, 2025, with a further increase to 16% in April 2026. The government argues that this measure is necessary to address a projected R60 billion budget shortfall, exacerbated by the cessation of U.S. aid for HIV/AIDS programs, and to fund critical sectors such as health, education, and infrastructure.
The DA has strongly opposed the VAT hike, contending that it will disproportionately affect low-income South Africans who already face high unemployment and inflation. DA leader John Steenhuisen has stated that the party will not support the budget in its current form and is prepared to challenge the VAT increase in court .
Despite the DA’s opposition, the ANC managed to pass the budget with support from smaller parties like ActionSA, which agreed to back the proposal in exchange for a promise to reconsider the VAT increase within 30 days .
To mitigate the impact on vulnerable populations, the government has proposed expanding the list of VAT-exempt essential items and increasing social grants above the inflation rate . However, critics argue that these measures are insufficient to offset the financial burden on the poor.
The VAT dispute underscores the fragility of South Africa’s coalition government, formed after the ANC lost its parliamentary majority for the first time since the end of apartheid. The ongoing tensions raise concerns about the coalition’s ability to govern effectively and implement necessary economic reforms.
