Enoch Godongwana, Finance Minister of the Government of National Unity (GNU), distances himself from the contentious 0.5 percent VAT increase and asserts that Parliament has the authority to revoke it. “I’m not married to any percentages or any increase,” Godongwana said in an interview with Newzroom Afrika on Wednesday, on the sidelines of President Cyril Ramaphosa’s service delivery oversight visit to the Eastern Cape.

Godongwana said the budget he intially proposed without VAT increases, was still available. The purpose of the trip, which was led by Ramaphosa and his Cabinet, was to evaluate the state of provincial service delivery. Godongwana said decisions around the VAT increase are ultimately policy matters to be decided by Parliament, not him. “If you remove the 0.5% VAT increase, you must find an equivalent amount on the expenditure side to ensure the fiscal framework remains balanced,” he said. The 0.5% VAT increase has sparked divisions within the GNU. The country's budget deficit will be reduced and essential programs will be funded as a result of the increase.

The African National Congress-led government managed to pass the budget with the support of smaller parties, including those outside the GNU. However, disagreements between the Democratic Alliance (DA) and Freedom Front Plus (FF+) have widened divisions within the GNU, with some members of the ANC National Executive Committee (NEC) reportedly calling for the DA's exclusion from the coalition government. Parties such as ActionSA and Build One South Africa (BOSA), which voted in favour of the budget, have submitted alternative revenue-generation proposals. Godongwana acknowledged that Parliament still has the ability to intervene, even though the VAT increase is scheduled to take effect on May 1. He clarified that he does not have the authority to unilaterally reverse the VAT increase.

“Both Section 12 of the PFMA (Public Finance Management Act) and Section 7, Subsection 4 of the VAT Act do not give me automatic power to change it,” he said. "Once the necessary proposals are made, parliament has the power to change it." Godongwana said he is awaiting formal communication from Parliament on the way forward. of the GNU, opposed the hike and voted against the budget. “Parliament’s resolution is that the parties must make proposals to me that do not undermine the fiscal framework but replace the revenue that would have been generated by the 0.5%,” he explained. "We'll be up and running as soon as I receive that communication." He emphasized that reversing the VAT increase would not necessarily entail budget cuts when asked what the impasse might mean for provinces like the Eastern Cape.

“If you do away with the 0.5%, it doesn’t mean budget cuts, it means the increase will not be as big as initially projected,” he said. “For example, social grants were set to increase by more than inflation. That increase may now be a decision that lies with the Parliament.” IOL News previously reported that the ANC is expected to abandon its push for a VAT increase in the upcoming budget, following intense opposition from its coalition partners in the GNU and other political parties. Following a series of meetings between the ANC and various parties, including the DA, it became evident that the VAT hike would receive little to no support.

The DA and ANC met on Saturday to discuss the ongoing budget impasse in South Africa with the aim of finding a solution to the country's fiscal crisis, and although both parties described the discussions as constructive, the DA remains resolute that it will not back a VAT hike. A senior ANC member who was part of the series of meetings with other parties, admitted that the party had failed to convince others to support the VAT hike, saying that all the parties vehemently opposed the VAT hike. “I think it's time we listen if we are going to keep the GNU going and not alienate other organizations; we can't go at it alone. However they have to come up with solutions to the problems they bring.�

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