South Africa’s Finance Minister, Enoch Godongwana, has firmly ruled out resignation following a government reversal on a proposed increase in the value-added tax (VAT), despite mounting pressure from opposition parties.
Speaking to Reuters on the sidelines of the International Monetary Fund and World Bank spring meetings in Washington on Thursday, Godongwana defended his role, saying, “My job is to introduce money bills — nothing says they must be popular.”
The proposed VAT hike, which aimed to increase the rate by one percentage point over two years to bolster government revenue, was abruptly scrapped amid strong resistance from coalition partners. The reversal, seen as a political move to maintain stability within the ruling alliance, leaves a 75 billion rand ($4 billion) gap in South Africa’s medium-term budget.
The finance minister acknowledged the fiscal setback, stating he now has the responsibility of crafting “a different fiscal framework in line with the new realities of revenue and spending.” He warned that the VAT reversal would negatively impact the goals it was originally meant to address.
South Africa, already facing economic stagnation and rising living costs, now confronts the challenge of maintaining fiscal credibility. Godongwana emphasized that a credible budget would be key to influencing credit rating agencies. “If you ask me, I don’t think what will inform them is the noise,” he said. “What will trigger them is whether the final product is a sustainable budget.”
S&P Global Ratings currently maintains a positive outlook on South Africa. A robust and realistic fiscal plan could lead to the country’s first credit upgrade in two decades, while failure could increase borrowing costs and diminish investor confidence.
