After Postponing the 2025 Budget Speech Over Coalition Discord, the ANC Proposes a Scaled-Back 0.75% VAT Increase, Threatening to Sideline the DA and Partner with the EFF, Raising Stakes for Economic Policy and Unity Government Stability on March 3, 2025
Pretoria, South Africa – March 3, 2025, 6:27 PM CAT South Africa’s fiscal future hangs in the balance as the African National Congress (ANC) recalibrates its contentious VAT hike South Africa strategy, slashing its proposed increase from 2% to 0.75% while hinting at an alliance with the Economic Freedom Fighters (EFF) to push it through. The shift, revealed over the weekend, follows the unprecedented postponement of the 2025 Budget Speech on February 19—a casualty of fierce resistance from the Democratic Alliance (DA) and other Government of National Unity (GNU) partners to Finance Minister Enoch Godongwana’s original plan to lift VAT from 15% to 17%. With the revised budget now set for March 12, the ANC’s gambit risks fracturing the fragile coalition and reshaping the nation’s economic course.
The initial 2% hike, aimed at plugging a R60 billion deficit, sparked a revolt within the GNU, forcing Godongwana to shelve his speech just hours before its scheduled delivery—an historic first since 1994. The DA, led by John Steenhuisen, branded the tax “a dagger to the poor,” rallying allies like the FF Plus to demand spending cuts over new levies. “South Africa’s problem isn’t revenue—it’s wasteful spending,” DA finance spokesperson Mark Burke told reporters last week, unveiling an alternative budget heavy on efficiency and growth reforms. The standoff sent the rand sliding and markets jittering, compounded by U.S. President Donald Trump’s recent aid cuts over land disputes.
Now, the ANC’s trimmed 0.75% proposal—backed by President Cyril Ramaphosa at a February 24 cabinet meeting—seeks a middle ground, raising roughly R15 billion annually to fund grants, wages, and Eskom’s R400 billion debt burden. But with the DA unmoved, ANC Second Deputy Secretary-General Maropene Ramokgopa dropped a bombshell Sunday, warning the party could turn to the EFF if coalition partners balk. “We’ll get this budget passed, with or without them,” she told the Sunday Times, igniting speculation of a seismic political realignment.
The EFF, historically anti-VAT hikes, adds a twist. Leader Julius Malema has pushed wealth and corporate taxes instead, but party insiders suggest a deal could hinge on shielding the poor—say, via expanded zero-rated goods—a red line the pro-business DA won’t cross. “If the DA walks, we’re ready,” an EFF source quipped, nodding to Malema’s past openness to join the GNU. On X, sentiment splits: some cheer the ANC’s resolve—“Get it done!”—while others decry “tax tyranny” amid 32.9% unemployment and KZN’s flood chaos.
For everyday South Africans, the stakes bite deep. A 0.75% rise might add R50 monthly to a low-income family’s grocery bill, per Old Mutual economist Johann Els, while truckers like Durban’s Vusi Mthembu brace for diesel cost pass-throughs after a R1.05-per-litre jump today. “We’re drowning already—now this?” he sighed, eyeing a flooded rank. COSATU, meanwhile, floats a pension holiday to dodge VAT pain, but Treasury’s in a bind—debt’s at 75% of GDP, and growth’s a limp 1.1%.
As Godongwana tweaks his March 12 pitch, the GNU teeters. “This isn’t just about VAT—it’s who controls the purse,” said Wits analyst Dr. Jabulani Mnisi. A DA exit could topple the coalition, while an EFF pact might spook investors. For now, South Africa watches, wallets clenched, as politics and economics collide in a high-stakes duel.
