Finance Minister Enoch Godonwana has agreed to a court order that would halt the decision to raise the VAT rate by 0.5 percentage points.
The Minister of Finance and the main respondents to the issue, the Democratic Alliance (DA) and the Economic Freedom Fighter (EFF), agreed to settle the issue out of court, and the Western Cape High Court ratified the agreement on April 27, 2025.
“Godonwana welcomes the court’s order as it is perfectly consistent with his announcement on April 23, 2025 to halt the increase in VAT. As he has already announced his withdrawal, the Minister felt that there would be no reason to continue trial.
“The context of the suspension of increase is stated in the affidavit filed Sunday by the Minister in response to the Supplementary Affidavit of the Democratic Union (“DA”) filed on April 25, 2025,” the Ministry of Finance said.
The contents of the Minister’s corresponding affidavit were to reply to the points submitted to the most controversial points raised by the DA, but the secondary and equally important objective was to further clarify the basis behind the proposed increase to the VAT, subsequent withdrawals, and the procedural context to which future processes should be determined.
The Minister argues that his first budget proposal for March 12, 2025 is constitutional and appropriate given the limited options available to balance financial sustainability and service delivery needs.
“However, the decision was made to withdraw the proposal, listening to the submissions made by political parties and the public, carefully considering various consultations with various stakeholders, and the courts had an effect on it,” the National Treasury Ministry said.
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To set the record straight for the benefit of the broader public, the Minister highlighted the most prominent points covered in response affidavits such as:
Following the speaker’s letter on April 21, 2025, it has been revealed that the increase in VAT lacks the necessary political support. The ministry then announced plans to introduce a law to maintain VAT at 15% from May 1, 2025. Although reluctantly proposed, the increase in VAT was considered to be more harmful to economic growth and employment than the alternatives examined by the Treasury. The withdrawal would require a reduction in government spending, which will generate a medium-term revenue shortfall of around R75 billion, and will likely affect service delivery.
“The Minister welcomes the clarity and certainty provided by the court’s order. Similarly, he will still commit to financial liability and pursue alternative measures to ensure sustainable finances,” the Treasury said.
