Analysts have warned that the African National Congress (ANC) will face scrutiny over its recent proposal to increase the Value Added Tax (VAT) by 0.5%, which could alienate voters just as the party approaches critical local government elections scheduled for 2026.
Last month, Finance Minister Enoch Godongwana said the VAT hike was necessary to address the country’s fiscal challenges.
With the help of ActionSA, IFP, BOSA, and other smaller parties, the ANC approved the VAT increase.
Parliament voted 194 to 182 to adopt the 2025 fiscal framework report, which the Standing Committee on Finance had already approved without any amendments.
This move stirred tensions among the parties in the Government of National Unity (GNU), with the ANC's major coalition partner, the DA, opposing the VAT in court and the MK party accusing the ANC of failing to protect the poor.
Economists and political analysts have argued that such a tax increase would disproportionately affect low and middle-income households.
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Political analyst Joe Mhlanga voiced his concerns, arguing that the ANC failed to consider how its supporters would respond to the proposal.
Similarly, political analyst Mpho Nkosi said, "The ANC is treading on thin ice. A VAT hike could be perceived as a betrayal of the citizens loyal to the party. If they push this through, it could cost them in the upcoming local elections."
The potential backlash is underscored by the fact that the ANC has already been grappling with declining support in various regions, particularly urban areas where voters are increasingly disillusioned with the party’s handling of economic issues.
Historical trends indicate that tax increases often serve as a rallying point for opposition parties, giving them a platform to criticise the ruling party's effectiveness and empathy toward citizens' struggles.
In a South African Institute of Race Relations survey in late March 2025, 62% of respondents expressed opposition to a VAT hike, indicating a growing sentiment against further financial burdens.
The ANC's handling of this proposal will likely be scrutinised as voters weigh their options in the upcoming elections.
As the ANC strategises for the local government elections, analysts like Mhlanga and Nkosi emphasise the importance of balancing fiscal policy with the needs and sentiments of the electorate.
"If the ANC fails to communicate the necessity of this hike effectively or if it appears disconnected from the realities faced by ordinary South Africans, they may very well find themselves facing a significant electoral setback," Nkosi concluded.
It held meetings with other parties, including the DA, IFP, and others, to try to garner support for the VAT hike.
According to both the ANC and IFP, the VAT increase is a short-term intervention, and the government must urgently seek alternative revenue sources to cushion the impact on South African consumers.
The VAT rate is expected to increase to 15.5% on May 1, 2025 and 16% on April 1, 2026. The first 0.5% hike is expected to raise R13.5 billion in revenue.
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