South African Finance Minister Enoch Godongwana said he will stay in office despite mounting pressure from opposition parties following the government’s reversal of a planned value-added tax (VAT) increase.
Speaking on Thursday during the International Monetary Fund and World Bank spring meetings in Washington, Godongwana told Reuters that his role is to introduce fiscal measures, not necessarily to seek popular approval. “My job is to introduce money bills — nothing says they must be popular,” he remarked.
The controversy erupted after the government abandoned a proposal to raise VAT by one percentage point over two years, a move initially designed to boost state revenues. The reversal came amid fears that the tax hike could destabilize the country’s fragile coalition government, already under strain as South Africa grapples with slow economic growth and widespread public frustration over rising living costs.
Godongwana’s decision leaves a R75 billion ($4 billion) gap in the country’s medium-term budget. He now faces the challenge of developing what he described as “a different fiscal framework in line with the new realities of revenue and spending.”
The finance minister warned that withdrawing the VAT increase would inevitably hurt the government’s financial goals. “I still maintain that if the purpose for which the VAT was raised is taken into account, its reversal will have a negative impact on those issues — that cannot be disputed,” he said.
The reworked budget plans are set to be closely scrutinized by S&P Global Ratings, which currently maintains a positive outlook on South Africa. A strong fiscal strategy could pave the way for the country’s first credit rating upgrade in two decades, while a misstep could push up future borrowing costs and discourage investment.
Godongwana expressed confidence that the quality of the final budget, rather than public reaction, would determine how credit agencies respond. “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.”
