In an unprecedented move, the Speaker of Parliament, Thoko Didiza, was forced to cancel the 2025 Budget address by finance minister Enoch Godongwana on Wednesday.
This decision came after Cabinet was unable to reach a consensus on a proposed two-percentage point increase in value-added tax (VAT) included in the Budget.
The Budget is now set to be presented on March 12.
The proposed VAT hike, which would raise the rate from 15% to 17%, caught many by surprise, as it significantly exceeded the one-percentage point increase that had been anticipated.
The proposal has sparked fierce opposition from various political parties, including the Democratic Alliance, as well as key trade unions such as the Congress of South African Trade Unions (COSATU) and the South African Communist Party (SACP).
Prior to the speech, multiple reports circulating suggested the VAT increase from 15% to 17%, with a leaked SARS tax summary document seeming to confirm the proposal.
Minister Godongwana expressed his dismay over the leak of the VAT proposal, accusing a Cabinet member of prematurely disclosing the information.
He clarified that Cabinet had been made aware of the National Treasury’s proposal two weeks before the special Cabinet meeting on February 19, but the exact details of the VAT increase had not been shared at that time.
If approved, the VAT increase is expected to generate an additional R58 billion in revenue for the 2025/26 fiscal year. The proposal comes amid a R19.3 billion downward revision of the 2024/25 tax revenue estimate and a widening government deficit of 5%.
Godongwana indicated that the ongoing discussions within Cabinet are essential for determining how best to address the country’s fiscal priorities.
He noted that the options on the table include reducing government spending, increasing taxes, or raising borrowing levels—an approach that would deviate from the National Treasury’s current focus on debt reduction.
Due to the disagreement, Cabinet has opted to delay the release of the 2025 Budget to allow for further deliberations. These discussions will remain confined to Cabinet, with no plans for a comprehensive review of government spending before the new Budget date of March 12.
Godongwana also remarked that there is no formal mechanism within Cabinet to resolve deadlocks regarding the approval of the Budget.
In terms of the medium-term budget policy statement (MTBPS), the GNU’s main focus areas include achieving inclusive economic growth and job creation to address South Africa’s prolonged economic and fiscal weakness, with a focus on prevailing electricity shortages, logistics challenges and declining capital investment which have historically contributed to low growth.
However, following the MTBPS, the revenue estimate for 2024/2025 was revised downwards by R22 billion, according to ENS Africa.
