VAT hike reversal — what happens next in the Budget process?
Budget 3.0 is in the works — more than two months after Finance Minister Enoch Godongwana's first attempt at a Budget was supposed to have been tabled.
The process of passing South Africa's Budget is beginning anew after the planned increase in value-added tax (VAT) was suspended last week through an order of court.
What happened?
On Sunday, 27 April, the Western Cape Division of the High Court ruled in favour of the DA and the EFF's application to suspend Finance Minister Enoch Godongwana's 0.5 percentage point VAT increase, announced in his Budget Speech on 12 March. The contentious VAT increase was due to be implemented on 1 May.
This was after Godongwana withdrew his opposition to the application, saying in an affidavit filed on Sunday morning that he had done so after realising that he had no political support for a VAT increase, and after he received a letter from National Assembly Speaker Thoko Didiza asking him to table alternative revenue proposals by 2 May.
The draft order was made by agreement between the parties, including the DA, the Speaker and the finance minister.
In the order on Sunday evening, Western Cape Judge President Nolwazi Mabindla-Boqwana and judges Kate Savage and Andre le Grange suspended Godongwana's 12 March announcement adjusting the VAT rate, 'pending the passing of legislation regulating the VAT rate' or the final determination of the Part B of the court application, whichever comes first.
Further, the judges ordered that the resolutions of both Houses of Parliament adopted on 2 April, to accept the report of Parliament's finance committees on the fiscal framework, be set aside.
'This enables the minister of finance to table the national Budget afresh,' said parliamentary spokesperson Moloto Mothapo in a statement on Tuesday.
Why was a court order needed?
The Finance Ministry announced the shock reversal of the VAT increase in a statement issued minutes after midnight on Thursday, 24 April.
But for such a reversal to be 'legally effective and enforceable', Mothapo said it required a legal rescission of the resolution of both Houses taken on 2 April, by either passing a Rates and Money Amounts Bill in Parliament and its assent by the President before 1 May, or through a court order.
'Since the withdrawal of the VAT increase, the Minister tabled the Rates and Monetary Amounts and Amendment of Revenue Laws Bill to give legal effect to the decision to maintain the VAT rate at 15%. However, given the tight legislative timeframes, it was not practically possible for the Bill to be processed by both Houses of Parliament and signed into law before 1 May 2025,' he said.
'In addition, because the matter was already the subject of litigation, a court order became the only available mechanism to make the withdrawal legally enforceable and to remove the uncertainty. The court order thus ensured legal certainty and prevented the previously announced VAT increase from automatically taking effect on 1 May.'
Godongwana has also withdrawn the Division of Revenue Bill, which outlines how funds will be divided between the national, provincial and local governments, and the Appropriation Bill, which allocates money to specific priorities like salaries and goods and services, after he had written to Didiza indicating that he would withdraw the Bills.
As there is no Appropriation Bill before Parliament, according to Mothapo, there are no Budget votes currently scheduled.
'A new Appropriation Bill and revised Budget instruments will need to be introduced (through the Budget Speech), after which the Budget votes will be scheduled afresh in accordance with the legislative framework and parliamentary procedures,' he explained.
The Finance Ministry said Godongwana expected to introduce a revised version of the Appropriation Bill and Division of Revenue Bill within the next few weeks.
Does Parliament admit that its processes to pass the fiscal framework were flawed?
No. While Parliament entered into an out-of-court settlement agreement regarding the VAT increase and the process of adopting the fiscal framework, Mothapo said Parliament 'did not admit to any procedural defect'.
He said the processes followed by both Houses of Parliament in adopting the framework 'strictly complied' with both the Constitution and the Money Bills and Related Matters Act.
'Parliament had a strong case before the court. The decision to settle was driven by the recognition that subsequent developments — including the minister's withdrawal of the Division of Revenue Bill and the Appropriation Bill, and the introduction of a new Bill maintaining the VAT rate at 15% — had overtaken the original framework. This made a negotiated resolution necessary and in the national interest,' said Mothapo.
When will Godongwana table a new Budget?
It's unclear, but Mothapo said Parliament was 'actively engaging with the executive to finalise an appropriate date for the tabling of the revised national Budget.
'It is expected that the minister will table the new Budget instruments within the next few weeks,' he said.
In terms of the Money Bills and Related Matters Act, Parliament must consider and adopt the Budget within four months after the start of the financial year. Given that the 2025/26 financial year began on 1 April, Mothapo clarified that the Budget must be finalised before 31 July.
How will the government cover the R75bn shortfall in revenue?
In a statement on Sunday, the National Treasury said the withdrawal of the VAT increase 'creates a medium-term revenue shortfall of approximately R75-billion, necessitating decreased government expenditure with likely impacts on service delivery'.
Now that VAT has been scrapped, the National Treasury has to find R75-billion to plug the hole in the kitty over the medium term.
Political parties inside and outside the Government of National Unity have made recommendations on how to generate the required revenue.
At a press conference on Friday, the DA said it would be pushing for a review of government spending.
'The DA will now be pushing very hard for the necessary spending review,' DA Federal Council chairperson Helen Zille told reporters.
'We want to cut waste, and we want to cut corrupt and fruitless expenditure, and that is what our spending review seeks to achieve,' she said. DM
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Daily Maverick
12 hours ago
- Daily Maverick
Two South African engineers released from Equatorial Guinea jail over two years after arrest
The long-awaited return of Frik Potgieter and Peter Huxham follows a presidential pardon, months of diplomatic negotiations and international calls for justice. South African Frik Potgieter and dual UK-South African citizen Peter Huxham, oil engineers who had been imprisoned for more than two years in Equatorial Guinea, have finally returned home – freed by a presidential pardon that ends a harrowing ordeal marked by anguish, uncertainty and relentless diplomatic effort. 'This brings an end to an ordeal of anguish, uncertainty and unwavering efforts by many to secure their freedom,' said family spokespersons Shaun Murphy and Francois Nigrini. According to a declaration by the United Nations, Potgieter and Huxham had been unlawfully and arbitrarily detained in the west African country since 9 February 2023, following their conviction and sentencing to 12 years in prison on drug trafficking charges. However, their families believe the true reason behind the arrests lies elsewhere. Just two days before their detention, the Western Cape Division of the High Court had ordered the seizure of a superyacht owned by Teodoro Obiang Mangue, the vice-president of Equatorial Guinea and son of the country's long-time president, Teodoro Obiang Nguema Mbasogo. That order followed an earlier court decision to seize two luxury villas in Cape Town also linked to Mangue. Both seizures were connected to a separate legal matter involving another South African citizen allegedly imprisoned unlawfully in Equatorial Guinea. 'Complex' negotiations In July 2024, the United Nations Working Group on Arbitrary Detention issued a formal opinion stating that the men's trial had been unfair and that their continued detention was 'arbitrary and illegal'. It called for their immediate release, a call that went unheeded by Equatorial Guinea's president, despite direct appeals from both the incumbent minister of international relations, Ronald Lamola, and his predecessor, Naledi Pandor. Their eventual release, announced on 21 June, followed clemency granted by the president of Equatorial Guinea after months of sustained diplomatic appeals led by the South African government. 'The Government of the Republic of South Africa welcomes the release,' the Department of International Relations and Cooperation said. It expressed 'sincere gratitude' to Equatorial Guinea for granting the pardon and enabling Potgieter and Huxham to reunite with their families. It also recognised the extensive and complex diplomatic work behind the scenes, acknowledging the 'sensitive legal and bilateral dimensions' of the case. Since the men's arrest, the South African government remained actively engaged through official diplomatic channels, regularly appealing for clemency on humanitarian grounds. Special envoys were dispatched, and ongoing engagement was maintained at ministerial level. The department also acknowledged the constructive diplomatic engagement maintained throughout the ordeal. It reaffirmed its commitment to strengthening bilateral ties with Equatorial Guinea, praising the cooperation that allowed consular access and facilitated ongoing dialogue, even amid considerable diplomatic strain. Families express relief and gratitude Since their detainment, the families of Potgieter and Huxham have undertaken extensive efforts to secure their release, including launching the 'Free Frik and Peter' campaign with a dedicated website and online petition to raise awareness and demand urgent government action. They had engaged the South African Parliament, which adopted a unanimous motion calling for their immediate release and condemned their unlawful imprisonment. The families also appealed to the Pan-African Parliament for intervention and sought support from international bodies including the United Nations Working Group on Arbitrary Detention, which declared their detention illegal and arbitrary. 'We are overwhelmed with relief and joy. The last two years and four months have been unimaginably painful for both our families. Today, we are finally able to say: Frik and Peter are safely back home,' said Murphy and Nigrini. The families extended heartfelt thanks to all who supported them during the long campaign for release, including SBM Offshore, the men's employer, the South African and UK governments, international diplomatic partners, parliamentarians, legal teams, Hostage International, civil society organisations and members of the media. They also specifically thanked Pandor and Lamola, both of whom travelled to Equatorial Guinea as special envoys on behalf of President Cyril Ramaphosa. 'Their return home is the result of collective efforts over many, many months, and we are deeply grateful to everyone who played a role in securing their freedom,' said the families. 'This has been a long and difficult journey. We want to thank every person who stood with us – your support carried us through our darkest moments.' As Potgieter and Huxham begin the process of recovery and healing, their families have asked for privacy. DM
IOL News
13 hours ago
- IOL News
Watchdogs say corruption, cadre deployment worse under GNU
One year after the formation of South Africa's Government of National Unity, civil society watchdogs say corruption is not only ongoing but worse in some departments. Image: IOL Graphics Talk is cheap, and the GNU is proving it. Civil society watchdog, Organisation Undoing Tax Abuse and Accountability Now warns that corruption has not just continued under the coalition government, in some departments, it's getting even worse. The GNU, formed after the African National Congress (ANC) lost its majority in the May 2024 general elections, has come under fire for continuing many of the same practices that plagued previous administrations. The GNU was established after the ANC entered into a coalition with its long-time rival, the Democratic Alliance (DA), and several smaller parties. While the arrangement was praised as a new chapter in South African politics, tensions over corruption cases, policy implementation, governance, and ethics have plagued the coalition from the start. Despite pledges to curb corruption, cadre deployment, and nepotism, these issues have persisted. Others argue that they have even worsened. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Speaking to IOL News, Wayne Duvenage, CEO of the Organisation Undoing Tax Abuse (OUTA), said while there have been signs of improvement in governance, particularly in departments led by the DA - corruption remains rampant. 'In fact, it's worse because the networks that exist within many of the government departments, especially in higher education and transport, are still plundering away. That I can assure you,' Duvenage said. He said that these networks were established during the fifth and sixth ANC administrations and continue to exert influence. Among the most notable scandals under the GNU are allegations involving senior ANC members: Human Settlements Minister Thembi Simelane, who reportedly took a R575,600 loan from the now-collapsed VBS Mutual Bank to buy a Sandton coffee shop while serving as the mayor of Polokwane. Appearing before the Justice Portfolio Committee in Parliament last year, Simelane denied any wrong-doing regarding the controversial VBS scandal and a loan she had taken to buy a coffee shop. President Cyril Ramaphosa has since removed Simelane as Minister of Justice and Constitutional Development following corruption allegations and moved her to Human Settlements. Mmamoloko Kubayi, who was the Minister of Human Settlements was appointed to the portfolio previously held by Simelane. She has also been linked to inflated billing with an Eskom contractor, claims she denies. Minister in the Presidency Khumbudzo Ntshavheni, who has been under investigation by the Hawks for R2.5 million in alleged tender fraud during her tenure at Ba-Phalaborwa Municipality. ANC secretary general Fikile Mbalula has previously defended Ntshavheni, saying that she has to respond to the allegations. IOL News previously reported that speaking at a media briefing three months ago, Mbalula said the party would not be drawn into commenting on the matter suffice to say that the ANC will respond on "something tangible". Accusing the DPCI or Hawks of trying to ruin Ntshavheni's image, Mbalula said law enforcement must not seek to find people guilty through media. Ntshavheni has not said anything regarding the allegations. Despite mounting calls from political parties for Ramaphosa to take action against the two, no action has yet been taken against either minister. Recently, the Sector Education and Training Authority (SETA) has faced public backlash following controversial board appointments by Higher Education Minister Dr Nobuhle Nkabane, including figures with strong ANC ties, including Gwede Mantashe's son, Buyambo. The appointments were later withdrawn. The National Student Financial Aid Scheme (NSFAS) has also been embroiled in corruption allegations. The previous board was dissolved, and the institution placed under administration. A new board has since been appointed, with a mandate to clean up operations. Duvenage acknowledged that the GNU has led to more civil society engagement and less unilateral decision-making than in previous administrations. He pointed to the rejection of a proposed 2% VAT increase as a sign of healthy political contestation. 'It's been going for a year, and it has had its ups and downs, but it has held its ground,' he said. 'The fact that they couldn't steamroll the budget through Parliament is a positive sign.' He added that despite ideological differences, the ANC and DA have managed to hold the coalition together. 'So far, actually, so good,' he added. However, Duvenage admitted that true accountability remains elusive. 'There's a long way to go.' Meanwhile, accountability advocate Paul Hoffman of Accountability Now emphasised the structural weaknesses in prosecuting corruption. 'The Zondo Commission identified more than 1,000 individuals involved in corruption. But the Criminal Justice Administration has done little,' Hoffman said. He criticised the Investigating Directorate Against Corruption (IDAC), established to tackle high-level graft, calling it ineffective. Hoffman argued that the National Prosecuting Authority (NPA) is not independent enough to deal with serious corruption, as it operates under the control of the Department of Justice. 'The Constitutional Court has said corruption should be handled by a body outside executive control,' Hoffman told IOL News. 'The NPA is not that body.' The DA has previously introduced two bills in Parliament calling for a new Chapter 9 anti-corruption commission, a move Hoffman believes could be transformative, if passed. 'It will need ANC support to pass, requiring a two-thirds majority. Until that happens, the culture of impunity will continue,' he said. The DA has previously put forward two private member's bills to fight corruption and cybercrime. One calls for a new Chapter 9 Anti-Corruption Commission to tackle serious graft and organized crime, while the other proposes a Cyber Commission to deal with digital threats. He added that effective governance under the GNU depends heavily on whether structural reforms are enacted. 'The GNU has improved parliamentary accountability in some ways, like with the budget process. But that's not enough.' Hoffman also tied corruption to South Africa's broader socio-economic crises, including high unemployment, inequality, crime, and poor infrastructure. 'You can't grow the economy while investors are afraid of losing their money to corruption,' he said. 'Addressing corruption is the number one priority.' According to both Duvenage and Hoffman, without institutional reform and political will, South Africa's long-standing issues will remain unresolved. This comes as the GNU enters its second year, the coalition faces mounting pressure to act decisively. IOL Politics
eNCA
2 days ago
- eNCA
Language row erupts during Kouga council meeting
JEFFREYS BAY - The Kouga Municipality in the Eastern Cape is embroiled in a language controversy. Opposition parties allege that isiXhosa-speaking councillors are being silenced for speaking their mother tongue during council meetings. The Speaker, who reportedly does not speak isiXhosa, is accused of insisting that councillors use only English or Afrikaans, threatening action for non-compliance. The Speaker maintains, however, that English has always been the primary language of council proceedings. The caucus leader for the DA in the Kouga Municipality has dismissed the language bias claims. Bornman Hattingh, who is also the mayor, says they've always used English and Afrikaans.
