South Africa's Treasury Seeks Alternatives to VAT Hike

South African President Cyril Ramaphosa has indicated that while the National Treasury is exploring alternatives to raising the value-added tax (VAT), the likelihood of avoiding an increase remains low. The Democratic Alliance (DA), a key coalition partner, has rejected a proposed 1 percentage point VAT hike, arguing it would disproportionately impact the poorest citizens. Ramaphosa stated that Treasury's review process will continue for 30 days before any conclusions are drawn. Meanwhile, the DA has filed a legal challenge against the budget process, deepening tensions within the fragile coalition government. The situation raises concerns about the DA potentially exiting the coalition, which was formed after the African National Congress lost its parliamentary majority for the first time since the end of apartheid. The proposed VAT increase is set to go into effect on May 1, 2025, following the budget's approval by the government.