South Africa slashes planned VAT hike after pushback from Democratic Alliance

In a move seen as a last resort to prevent South Africa's coalition government from collapsing, finance minister Enoch Godongwana has dropped a controversial value-added tax increase on Thursday.

His decision comes as South Africa's second biggest party, the Democratic Alliance (DA), threatened to leave the governing coalition over the VAT increase.

The Democratic Alliance argued that the tax would hurt the country's financially weakest households the most.

South Africa has been struggling economically in recent months, with the population facing rising living costs and an unemployment rate currently at 32%.

Godongwana's initial proposal for the tax hike would have seen VAT increase by one percentage point over two years.

The measure was intended to contribute to refilling the state treasury and fund crucial sectors like education or health.

With the tax, which the African National Congress (ANC) supported, the government would have made up for 75 billion missing rands in its budget.

The finance ministry has confirmed that TVA would remain at its current level at 15%.