Finance Minister Enoch Godongwana has reached a settlement with the Democratic Alliance (DA) and the Economic Freedom Fighters (EFF) in response to their legal challenge against the national budget passed by Parliament in March.
The Western Cape High Court has ruled that the fiscal framework adopted by Parliament be set aside, effectively suspending a proposed VAT increase from 15% to 15.5%, which was due to take effect on 1 May.
The original budget was backed by the African National Congress (ANC), Inkatha Freedom Party (IFP), ActionSA, and several smaller parties, who supported Godongwana’s proposal despite raising concerns about the VAT increase. These parties argued that the budget needed to be passed promptly and could be amended later.
Parliament adopted the 2025 fiscal framework report by a vote of 194 to 182, and the Standing Committee on Finance approved it without changes. Efforts to formally amend the budget were rejected, as doing so would have sent it back to National Treasury for review.
Instead, ANC and IFP committee members endorsed a non-binding proposal from ActionSA recommending the cancellation of the VAT increase and addressing the absence of inflationary adjustments to tax brackets. The recommendation requested that alternatives to the VAT hike be explored within 30 days, though it did not offer any specific suggestions.
The DA and EFF contested the legality of the VAT increase, arguing that it was unconstitutional for the Minister of Finance to implement such a change without explicit Parliamentary approval.
In response, Godongwana’s office announced plans to introduce a new Rates and Monetary Amounts and Amendment of Revenue Laws Bill to officially stop the VAT hike. However, legal experts warned that with the fiscal framework already approved, halting the increase would require a court decision.
The settlement and the court’s ruling now provide a lawful path to reversing the VAT hike.
According to News24, Godongwana submitted an affidavit on Sunday clarifying that the settlement should not be seen as an admission that the process was unconstitutional. He stated that he would no longer oppose the DA and EFF’s legal challenge concerning the VAT announcement.
Godongwana emphasized that he had only proposed the VAT hike reluctantly, believing the alternatives could have been more harmful, but later reconsidered after recognizing insufficient political backing for the measure.
Political theatre
Helen Zille, DA federal council chairperson
Although there had been reports that Finance Minister Enoch Godongwana denied negotiating a settlement with the DA and EFF, he confirmed in an affidavit that such talks did occur.
“After the matter was argued and judgment had been reserved, I understood it was inappropriate to influence the process without the consent of all parties involved,” he stated.
He explained that his legal team approached the legal representatives of all parties in the litigation to propose a draft settlement agreement.
Godongwana emphasized that he initiated these talks on the understanding that they would remain confidential. However, he said the DA issued a public statement as soon as the process began.
“This was clearly inappropriate and cast doubt on whether the discussions could proceed in good faith. We ultimately determined that they could not, and therefore the process was abandoned,” he said.
After the High Court ruling, the DA released a statement welcoming the outcome.
“This judgment confirms that any changes to the VAT rate must receive proper parliamentary approval before implementation. It also nullifies the unlawful support that had been extended to this VAT increase,” said DA federal chair Helen Zille.
“We are pleased that the Minister of Finance eventually returned to the negotiating table and agreed to suspend the VAT hike in a manner that complies with the law.”
Zille stressed that the case demonstrated the importance of government accountability.
“It provides South Africans with the assurance that decisions affecting their finances won’t be made without proper oversight and legal procedure,” she added.
“The proposed VAT hike has now been officially halted through a court order, agreed upon by the Minister of Finance and the DA. The settlement also involves the Speaker of Parliament.”
