South Africa’s Finance Minister Enoch Godongwana has ruled out stepping aside following the government’s decision to withdraw a proposed value-added tax (VAT) hike, despite mounting criticism from political opponents and growing concern over the country’s economic trajectory.
Speaking in Washington, D.C. during the International Monetary Fund and World Bank spring meetings, Godongwana defended the fiscal proposal and its objectives, stating that his role is to table financial legislation—not to guarantee its popularity.
“I’m responsible for introducing money bills,” he told reporters. “There’s no obligation that they must always be well-received.”
The now-abandoned VAT plan, which aimed to incrementally increase the rate by one percentage point over two years, was intended to bolster public finances amid sluggish growth. But the move sparked backlash from both the public and within the governing coalition, forcing an abrupt reversal on Thursday and exposing deep fault lines in the administration’s economic strategy.
The reversal creates a funding gap of 75 billion rand (approximately $4 billion) in the medium-term budget. Godongwana now faces the task of overhauling the fiscal framework to reflect revised revenue expectations.
“If you understand the reasoning behind the VAT proposal, you’ll realise that its withdrawal compromises the objectives it was meant to support,” he said.
South Africa, Africa’s most industrialised economy, continues to grapple with low growth, high unemployment, and inflationary pressure—factors that have stirred public frustration and placed pressure on the state’s finances.
Credit agencies are watching the situation closely. S&P Global Ratings currently maintains a positive outlook on South Africa. A coherent and sustainable fiscal response could unlock the country’s first credit rating upgrade in nearly twenty years. However, any signs of fiscal drift may increase borrowing costs and dampen investor confidence.
Godongwana dismissed the idea that political pressure or public criticism would determine the next steps. “Noise isn’t what will move the ratings agencies,” he said. “They’ll be looking at whether the final budget reflects sustainability and responsibility.”
As the minister returns to Pretoria to revise the country’s fiscal game plan, the stakes remain high—not just for his political future, but for the broader economic path South Africa intends to follow.