The announcement, made just a week before the new rate was set to take effect on May 1, reversed the earlier Budget proposal to increase VAT. The change follows parliamentary consultations and political pressure, but it has left SME owners reeling.

“This is good news,” a small business owner from Nelspruit told Africa InTouch News, “but I have the urge to rant on behalf of SME businesses.”

According to her, countless hours and resources had already been poured into preparing for the increase. Software systems were adjusted, new contracts drawn up, and post-dated invoices, including rentals, sent out using the higher VAT rate.

“Vast amounts of man hours, all adding to the expense of small business owners, have been utilised in this exercise,” she said.

The media statement issued by the Ministry of Finance on April 24 confirmed that the decision to maintain the VAT rate at 15 percent was taken after “extensive consultations with political parties” and consideration of the recommendations of parliamentary committees. The reversal is expected to result in a revenue shortfall of approximately R75 billion over the medium term.

To accommodate the fiscal gap, the Minister has written to the Speaker of the National Assembly to withdraw both the Appropriation Bill and the Division of Revenue Bill. Revised versions are expected to be introduced within the next few weeks.

However, the Ministry gave no indication as to why businesses were notified so late. “I wonder if our government ever even consider the impact their nonsensical behaviour has on industry by letting us know only now,” the Nelspruit business owner said.

She added that, beyond the administrative burden, the lack of communication shows disregard for the operational pressures small businesses face. “There are businesses that have already paid support and IT staff to assist in changing the rates,” she said. “This kind of last-minute reversal has real financial consequences.”

With the proposed VAT increase now off the table, Treasury also confirmed that measures aimed at cushioning lower-income households from the impact of the increase will be withdrawn. Any additional revenue collected by SARS may be redirected to help offset the revised expenditure plans.