South Africa’s Finance Minister Enoch Godongwana has refused to resign after scrapping a proposed VAT hike. He dismissed opposition calls to step down, saying his role is to introduce financial legislation—not to win popularity.
“My job is to introduce money bills—nothing says they must be popular,” he said during a media briefing at the IMF and World Bank spring meetings in Washington on Thursday.
Godongwana had planned to raise value-added tax (VAT) by one percentage point over two years to boost state revenue. However, pressure from ruling coalition partners forced the government to drop the proposal. Critics argued the increase would worsen living costs amid slow economic growth and growing public dissatisfaction.
The VAT rollback has left a 75 billion rand ($4 billion) gap in the medium-term budget. Godongwana now faces the task of crafting a new fiscal plan that reflects current revenue limitations and political realities.
He defended the original proposal. “If we consider the reason behind the VAT increase, reversing it weakens our ability to address those issues,” he said.
The revised framework will attract close scrutiny from S&P Global Ratings, which maintains a positive outlook on South Africa. A credible budget could deliver the country’s first credit rating upgrade in 20 years. In contrast, a weak fiscal plan might raise borrowing costs and hurt investor confidence.
Godongwana remained confident. “I don’t think ratings agencies will be swayed by noise. What matters is whether the final budget is sustainable,” he added.
The policy reversal comes at a tense time. Godongwana also faces challenges from deteriorating relations with the United States. Despite this, he continues to focus on presenting a revised budget that balances political demands with fiscal responsibility.
