Finance Minister Enoch Godongwana will present a third version of the 2025 national budget on May 21, following intense pushback against a proposed VAT hike.

Initially planned to rise from 15% to 17%, the increase was first moderated to 16% before being scrapped entirely due to pressure from coalition partners and public opposition.

The reversal has left a R75 billion revenue gap, forcing the Treasury to explore alternative funding sources or spending cuts to preserve fiscal stability. The revised budget will be tabled against a backdrop of fragile coalition politics and a modest economic growth forecast of 1.9%.

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This move is part of a wider strategy to slash the State Department’s budget by nearly half, which also includes a drastic 75% reduction in foreign aid spending.

An internal government document reveals that the targeted closures include U.S. embassies in countries such as Lesotho, Eritrea, the Central African Republic, the Republic of Congo, The Gambia, and South Sudan. The closures may also affect U.S. consulates in Durban, South Africa, and Douala, Cameroon, with their duties likely shifting to neighboring U.S. missions.

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Critics warn that this reduction in diplomatic outreach could weaken U.S. influence on the African continent, especially at a time when other major powers, notably China, are expanding their engagement in the region. They also caution that the move could harm diplomatic relationships, limit economic collaboration, and reduce support for democratic governance.

The administration is also considering scaling back its diplomatic presence in parts of Europe and Asia, including shutting embassies in Malta and Luxembourg, as part of its broader efforts to cut federal spending and streamline operations.

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The current standoff revolves around a proposed 0.5 percentage point VAT increase, which several parties, including the DA, oppose. The fiscal framework, a key part of the budget, was passed with the support of parties outside the government of national unity (GNU), such as ActionSA and Build One South Africa (Bosa), under the condition that alternatives to the VAT hike would be explored.

Top ANC leaders, including Gwede Mantashe, Fikile Mbalula, and Gwen Ramokgopa, have been meeting with other political parties in Johannesburg to resolve the deadlock. The ANC is pushing for a new, structured approach, emphasizing the need for a predictable, rules-based system to ensure smooth governance and avoid future surprises during votes.

The ANC has indicated to parties like ActionSA, Al Jama-ah, and the United Democratic Movement (UDM) that it wants to formalize agreements going forward. Mbalula stressed that the ANC is focused on creating a stable system for all parties, not just negotiating with the DA.

The ANC is set to meet with a DA delegation on April 12, followed by talks with the Freedom Front Plus on April 13. Despite disagreements over the VAT increase, the ANC remains committed to the GNU, but has signaled that it will push for a reconfiguration of the coalition to include more aligned parties.

Deputy President Paul Mashatile confirmed that while the GNU faces challenges, these do not signal its collapse, as the agreement involves multiple parties, not just the ANC and DA. The ANC is committed to prioritizing the country’s needs over political conflicts and aims for a more stable and predictable governance model.

The Freedom Front Plus has expressed its commitment to the GNU, as long as it continues to play a positive role. However, the party has warned that it will reconsider its position if non-GNU parties are used to bypass coalition support for key policies.

As the budget process continues, the ANC is focused on securing the necessary support for critical votes, including the Division of Revenue and Appropriation Bills, despite opposition from certain parties.

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