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Parliament, Tuesday, 29 April 2025
INTRODUCTION
On 27 April 2025, Parliament entered into out-of-court settlement regarding the Value-Added Tax (VAT) increase and the 2025 Fiscal Framework. The settlement, made an order of the Cape High Court, suspends the VAT adjustment and sets aside the Fiscal Framework resolutions. This enables the Minister of Finance to table the National Budget afresh. The following questions are being answered to assist in understanding the background, legal context, and implications of these developments.
WHAT ARE THE TERMS OF THE SETTLEMENT?
In terms of the settlement made an order of court:
- The Minister of Finance’s announcement on 12 March 2025 — adjusting the VAT rate in two phases (an initial 0.5 - I point increase from 1 May 2025, and a further 0.5 percentage point increase from 1 April 2026) — is suspended pending the passage of legislation regulating the VAT rate or the final determination of the court proceedings.
- The resolutions of the National Assembly and the National Council of Provinces, adopted on 2 April 2025 to approve the 2025 Fiscal Framework, are set aside.
- This outcome enables the Minister of Finance to table the budget afresh.
WHY IS IT REFERRED TO AS AN OUT-OF-COURT SETTLEMENT WHILE AT THE SAME TIME IT STATES "COURT ORDER"?
An out-of-court settlement refers to an agreement reached privately between the parties involved in a legal dispute, without the court adjudicating and issuing a final judgment on the merits of the case. However, to give such an agreement legal force and ensure enforceability, the parties may request that the court endorse the settlement and make it an order of court.
In the context of this particular matter, it is important to highlight that the court requested the parties to engage and seek a settlement after the Minister of Finance formally withdrew his opposition to the Democratic Alliance’s application to suspend the VAT increase. This development opened the door for an out-of-court settlement, which the court subsequently endorsed as a binding order.
WHY WAS IT NECESSARY FOR THE PARTIES TO MAKE THIS OUT-OF-COURT AGREEMENT A "COURT ORDER?"
Although the Minister had publicly announced the withdrawal of the VAT increase, for such withdrawal to be legally effective and enforceable, it required a legal rescission of the resolution passed on 2 April by both Houses by either:
- Passing the relevant Bill through both Houses of Parliament and its assent by the President before 1 May 2025, or
- the issuance of a court order.
Since the withdrawal of the VAT increase, the Minister tabled the Rates and Monetary Amounts and Amendment of Revenue Laws Bill to give legal effect to the decision to maintain the VAT rate at 15%. However, given the tight legislative timeframes, it was not practically possible for the Bill to be processed by both Houses of Parliament and signed into law before 1 May 2025. In addition, because the matter was already the subject of litigation, a court order became the only available mechanism to make the withdrawal legally enforceable and to remove the uncertainty. The court order thus ensured legal certainty and prevented the previously announced VAT increase from automatically taking effect on 1 May.
IF THE AGREEMENT WAS REACHED VOLUNTARILY, WHY DID IT INCLUDE A COSTS ORDER? ISN'T THIS PUNITIVE?
No. The inclusion of the cost is not punitive at all. The inclusion of a costs order was a necessary component of securing the settlement. The other parties asserted that they had incurred substantial legal expenses in pursuing the matter and insisted on the recovery of some of their costs as a condition for settlement. In order to avoid protracted litigation, minimise further legal risk, and bring finality to the matter, it was expedient to accommodate this demand within the terms of the settlement.
BY BEING PARTY TO THE SETTLEMENT, DOES PARLIAMENT ADMIT THAT ITS PROCESSES WERE PROCEDURALLY DEFECTIVE?
No. Parliament did not admit to any procedural defect. The processes followed in adopting the 2025 Fiscal Framework strictly complied with the Constitution and the Money Bills and Related Matters Act, 2009. Parliament had a strong case before the court. The decision to settle was driven by the recognition that subsequent developments —including the Minister’s withdrawal of the Division of Revenue Bill and the Appropriation Bill, and the introduction of a new Bill maintaining the VAT rate at 15% — had overtaken the original framework. This made a negotiated resolution necessary and in the national interest.
WHY WAS IT NECESSARY TO SET ASIDE THE FISCAL FRAMEWORK APPROVED BY PARLIAMENT?
It became necessary to set aside the original Fiscal Framework and Revenue Proposals because new developments had overtaken the original framework. The Minister earlier withdrew the Division of Revenue Bill [B7–2025] and the Appropriation Bill [B6–2025], and introduced the Rates and Monetary Amounts and Amendment of Revenue Laws Bill [B14–2025], which maintains the VAT rate at 15%.
Setting aside the resolutions allows the Minister to table a revised and updated fiscal framework that reflects the current economic and revenue policy decisions.
WHEN WILL THE MINISTER TABLE A NEW NATIONAL BUDGET?
Following the withdrawal and setting aside of the previous budget instruments, Parliament is actively engaging with the Executive to finalise an appropriate date for the tabling of the revised National Budget. It is expected that the Minister will table the new budget instruments within the next few weeks, in line with Parliament’s commitment to ensuring certainty, fiscal oversight, and adherence to constitutional processes.
THE NEW BUDGET IS ONLY EXPECTED IN MAY. WILL PARLIAMENT BE ABLE TO CONCLUDE ITS PROCESSING WITHIN THE LEGALLY PRESCRIBED PERIOD?
Yes. In terms of the Money Bills and Related Matters Act, 2009 (Act No. 9 of 2009), Parliament must consider and adopt the national budget within four months after the commencement of the financial year. Given that the financial year began on 1 April 2025, the budget must be finalised before the end of July 2025.
Parliament stands ready to act swiftly and responsibly to process and adopt the revised National Budget within the prescribed timeframe, in full compliance with its constitutional and legislative obligations. Every effort will be made to ensure that government operations continue seamlessly and that the principles of accountability and sound financial governance are upheld.
DOES THE DELIVERY OF THE NEW BUDGET HAVE IMPLICATIONS ON THE PARLIAMENT PROGRAMME?
Once the date for the delivery of the revised National Budget is finalised, each House of Parliament — the National Assembly and the National Council of Provinces — will review and restructure their programmes accordingly. Through their respective Programme Committees, the Houses will set new timelines for the consideration and processing of each budget instrument and associated Bills. This ensures that all legislative steps are completed efficiently and that Parliament passes the budget within the legally prescribed timeframes, in compliance with the Money Bills and Related Matters Act, 2009.
DO THE PREVIOUSLY SCHEDULED BUDGET VOTES ALSO GET AFFECTED BY THESE DEVELOPMENTS?
Yes. The previously scheduled budget votes are affected, as there is currently no Appropriation Bill before Parliament. The Appropriation Bill, which provides for the allocation of funds to government departments and entities, has been formally withdrawn and accordingly the original budget process has been set aside.
A new Appropriation Bill and revised budget instruments will need to be introduced (through the Budget Speech), after which the budget votes will be scheduled afresh in accordance with the legislative framework and parliamentary procedures.
WHAT ARE THE COST IMPLICATIONS OF SCHEDULING ANOTHER BUDGET SPEECH?
There are no additional costs associated with scheduling the delivery of the revised Budget Speech. Unlike the State of the Nation Address (SONA), which is a ceremonial sitting involving joint sittings of both Houses, formal invitations, special protocol arrangements, and extensive logistical coordination, the Budget Speech is delivered during an ordinary plenary sitting of the National Assembly.
It does not require any special ceremonial arrangements beyond what is already budgeted for the routine sittings of the House. Therefore, the delivery of the new Budget Speech will be accommodated within existing parliamentary resources and schedules.
CONCLUSION
The out-of-court settlement reflects the strength of South Africa’s constitutional democracy and the ability of its institutions to resolve complex matters in the public interest. By avoiding prolonged litigation, Parliament has helped ensure legal certainty, fiscal stability, and the continued delivery of essential public services. Parliament remains committed to upholding the Constitution and serving the best interests of the people of South Africa.
ISSUED BY THE PARLIAMENT OF THE REPUBLIC OF SOUTH AFRICA
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