VAT increase not off the table for South Africa, and good news for Smart ID applications

South Africa’s rand remained stable during Thursday’s trading session as markets reacted to U.S. President Donald Trump’s unexpected criticism of President Cyril Ramaphosa, overshadowing the country’s budget presentation.

The rand was trading at 18.01 against the dollar, similar to its previous close. On Wednesday, Finance Minister Enoch Godongwana presented the 2025 budget for the third time, dropping plans to raise VAT, a controversial issue in earlier proposals.

Market focus shifted to Ramaphosa’s meeting with Trump, which aimed to improve strained relations after aid to South Africa was suspended earlier this year over land reform policies and a genocide case against Israel.

Ramaphosa stated that they agreed to discuss South Africa’s critical minerals but didn’t provide any other details.

On Friday, 23 May, the rand was trading at R17.93 to the dollar, R24.12 to the pound and R20.29 to the euro. Oil was trading slightly lower at $64.00 a barrel.

Here are five other important things happening in and affecting South Africa today:

VAT hike still on the table: According to Izak Odendaal, chief investment strategist at Old Mutual Wealth, South Africans may face a VAT increase next year if the National Treasury cannot improve government spending efficiency and SARS does not close the tax gap. [Daily Investor]

Good news for Smart IDs: South African banks Absa, FNB, and Standard Bank are supporting the Department of Home Affairs (DHA) in its plan to integrate smart ID and passport services into their banking apps. Home Affairs Minister Leon Schreiber announced this initiative in early April 2025. [Mybroadband]

Government finds R51 billion for Transnet: Transnet has secured an additional R51 billion in government guarantees, which will help refinance maturing debt and improve operations. This funding, approved by Transport Minister Barbara Creecy and Finance Minister Enoch Godongwana, adds to the R47 billion provided in December 2023, most of which has already been used. [Business Day]

No need to panic over chicken supply: South Africa’s largest poultry organisation has confirmed that the industry can compensate for the suspension of poultry imports from Brazil, which provides over 84% of these imports, due to an avian influenza outbreak. The South African Poultry Association (SAPA) said that the sector currently slaughters 21.5 million birds weekly, but can increase this by 1 million if needed. SAPA does not expect price increases due to the ban, adding that winter typically sees lower chicken demand. [News24]

Rand water warns of low supply due to maintenance: Residents in Gauteng should expect reduced water supply due to planned infrastructure maintenance by Rand Water. The maintenance will begin next Thursday and last four days, coinciding with lower water consumption. It will occur at various times and locations across municipalities in preparation for increased demand in August. [PrimediaPlus]