EDITORIAL | What next for Enoch Godongwana after his VAT U-turn?

Finance minister Enoch Godongwana's change of heart with regards to the VAT hike is good news for consumers and a big win for political parties such as the DA, ActionSA and the EFF who stood firm in their resistance to the increase.

But what does it mean for him, as someone who has previously argued that a VAT increase was unavoidable? Is this a reflection of the decline of his influence, and could it possibly compromise his position in cabinet?

The DA and EFF have already called for his head, though the ANC is closing ranks — for now. The reversal of the VAT hike is undeniably a victory for the political parties that rallied against it and South African consumers who are, for now, not going to burdened with an extra tax from May 1. 

But the U-turn could have serious consequences for the budget as government will have to review expenditure — which may result in cuts. Despite the outcry from South Africans, Godongwana was steadfast in his view that there was no other way revenue could be raised without incurring more debt.

Responding to the urgent cases by the DA, with the EFF intervening, asking the Western Cape High Court to suspend his March announcement that the VAT rate would increase by 0.5 percentage points on May 1, and to interdict Sars from implementing the decision, Godongwana said the consequences of suspending the VAT hike would be “severe and far reaching”.

“Government would be immediately forced either to cut expenditure or to increase borrowing. Both options carry risks,” he said.

After weeks of uncertainty and suggestions that the Government of National Unity could collapse due to the VAT hike impasse, the announcement by Godongwana makes this now seem unlikely.

Political formations inside the GNU that resisted the VAT increase have reminded the ANC it doesn't govern alone.

However, the tenuous peace among GNU partners raises questions about government’s ability to handle its finances. The pressing concern now is the R75bn shortfall that will result from this decision. 

As the finance minister contemplates where these funds will come from, the stakes are high. National Treasury must identify substantial cuts or revenue sources that do not further strain already burdened citizens.

What government programmes will be on the chopping block? Education and healthcare could be targets in budget cuts, but any reductions in these areas could evoke public outrage and political backlash. Decisions must be weighed carefully; the fight against corruption and waste must be prioritised as a sorely needed measure to recover wasted money.

As the finance minister navigates this increasingly precarious situation, one must wonder whether he will adapt to the realities of political negotiation and public sentiment or continue to face defeat.

Above all, the reversal is largely made possible because of the outcome of last year's elections. Our political parties would not have fought so much for this tax reversal had the ANC still had the majority vote.