Issued by Ismail Joosub on behalf of the FW de Klerk Foundation on 24/04/2025

The FW de Klerk Foundation welcomes the announcement by the Minister of Finance to withdraw the proposed VAT increase and maintain the Value-Added Tax rate at 15% from 1 May 2025. This decision follows extensive consultations and input from parliamentary committees, as well as legal and civil society concerns about the economic and constitutional implications of such a hike.

Had the VAT rate been increased, millions of South Africans , particularly lower- and middle-income households, would have borne the brunt of higher prices on essential goods and services. In a country already grappling with high unemployment, food insecurity and service delivery challenges, the VAT increase would have exacerbated inequality and placed additional pressure on households least able to absorb it.

While the decision avoids that immediate burden, it does not eliminate the underlying fiscal shortfall. The National Treasury has estimated a R75 billion revenue gap over the medium term, necessitating a full review of current expenditure priorities and the introduction of a revised Appropriation and Division of Revenue Bill in the coming weeks.

Christo van der Rheede, Executive Director of the FW de Klerk Foundation, commented: “Maintaining the VAT rate at 15% is a vital decision for preserving the purchasing power of millions of vulnerable South Africans. Fiscal consolidation must not come at the expense of social cohesion or economic participation. We urge the government to explore alternative revenue measures that stimulate growth, widen the tax base and reduce wasteful expenditure, rather than relying on regressive taxation.”

This moment calls for innovative, equitable alternatives to close the gap. The Foundation urges that revenue measures be grounded in the principles of section 215 of the Constitution, which mandates that national budgeting processes promote transparency, accountability and the effective use of resources. Any new proposals must strike a balance between restoring fiscal sustainability and safeguarding the socioeconomic rights of vulnerable citizens.

Ismail Joosub, Manager of Constitutional Advancement at the FW de Klerk Foundation, added: “Section 215 of the Constitution demands that our budgeting process be transparent, accountable and effective. This moment provides an opportunity to reimagine fiscal policy in a way that is not only economically sound, but constitutionally grounded. We must pursue solutions that are both sustainable and just – ones that uplift communities rather than burden them.”

The Foundation will continue to monitor the process and reiterates its support for a fair, constitutional approach to public finance. An approach that prioritises long-term economic growth, responsible stewardship and the well-being of all South Africans.