24 April 2025
The Federation of Unions of South Africa (FEDUSA) notes the National Treasury’s reversal of the proposed Value-Added Tax (VAT) rate increase initially outlined in the 2025 National Budget. While FEDUSA welcomes the reprieve this brings to millions of working-class and poor households, we remain deeply concerned about the erratic leadership and policy volatility this reversal exposes. It is emblematic of a wider governance malaise that continues to erode public confidence and threaten South Africa’s economic and social stability.
The reversal, to be enacted through the Rates and Monetary Amounts and Amendment of Revenue Laws Bill, lays bare the reactive and fragmented approach to fiscal policy now typical of the National Treasury. By Treasury’s own admission, this shift did not emerge from proactive, people-centred planning but rather from sustained political and parliamentary pressure. It reinforces the troubling pattern of Laissez-Faire leadership at the heart of the economic cluster: ill-conceived policy measures are introduced, only to be hastily abandoned when their social and political consequences become untenable. This is not responsible governance, it is policy by default.
FEDUSA views this reversal not merely as an economic correction, but as a political indictment. It acknowledges that the VAT increase was ill-considered and out of touch with the daily realities of South Africans already grappling with joblessness, stagnant wages, and a rising cost of living. VAT is a regressive tax that places an undue burden on low-income households. Proposing its increase in the current climate was not only reckless – it was cruel.
Equally alarming is the institutional failure that allowed this proposal to advance as far as it did. Members of Parliament, entrusted to protect the constitutional and socio-economic rights of their constituents, failed to exercise due diligence or use the legislative tools at their disposal to halt this harmful proposal. Their acquiescence represents a dereliction of duty. It suggests a dangerous fatigue within the legislature, where fiscal proposals of significant consequence are rubber-stamped without the necessary interrogation or opposition.
South Africa cannot afford such a passive Parliament, nor can it endure a Cabinet that governs through crisis management rather than strategic foresight. Treasury’s current suggestion – that the R75 billion revenue shortfall caused by the reversal be offset through “adjusted expenditure” – raises serious alarm. Without clear protections and transparent planning, such adjustments will likely result in further cuts to essential public services and deepen the already damaging cycle of austerity.
FEDUSA is unequivocal: there must be no cuts to public services and the shortfall must not be absorbed at the expense of workers. Treasury must not seek fiscal balance on the backs of those who can least afford it.
We therefore call on government to urgently consider a broader and more progressive suite of solutions, including:
Expanding the capacity and operational efficiency of the South African Revenue Service (SARS) to improve revenue collection;
Accelerating efforts to curb Base Erosion and Profit Shifting (BEPS) and stemming illicit financial outflows, which deprive the country of billions in tax revenue each year;
Pursuing a more equitable, redistributive tax regime that places the burden where it can be most justly borne—on those with the greatest means;
Establishing clear, participatory mechanisms for inclusive fiscal planning that include labour, civil society, and all social partners;
Holding a comprehensive parliamentary debate and inquiry into how this VAT policy was conceived, tabled, and ultimately withdrawn, to ensure such policy missteps are not repeated.
The socio-economic challenges facing South Africa demand transparent, competent, and visionary leadership. What we have witnessed instead is a damaging combination of institutional inertia, poor judgement, and fiscal brinkmanship. This moment must serve as a wake-up call. Our country deserves better, more ethical leadership, more responsive governance, and an economy that prioritises people over profit.
FEDUSA remains committed to holding government accountable and to fighting for policies that uplift rather than undermine the working people of South Africa.
END.