South Africa plans to increase health and defense budgets in response to U.S. aid cuts, alongside raising VAT by 0.5%. The 2025 health budget will allocate 28.9 billion rand for salaries of medical personnel. This increase comes as the nation grapples with HIV service funding challenges after cuts to PEPFAR. The proposed budget requires cabinet approval, while VAT will be raised to fund expanded services, prompting public discontent.
In response to cuts in U.S. aid, South African lawmakers have proposed to increase funding for health and defense, while concurrently raising the value-added tax (VAT) by 0.5%, which will inevitably raise living costs for consumers. The Finance Minister, Enoch Godongwana, announced an allocation of 28.9 billion rand ($1.5 billion) for health in the 2025 budget, aimed at mitigating the effects of reduced financial support from the U.S.
This additional funding will support the salaries of approximately 9,300 medical personnel and 800 newly qualified doctors across clinics and hospitals. With overall health spending projected to escalate from 277 billion rand in 2024/25 to 329 billion rand in 2027/28, this increase comes amid challenges faced by South Africa’s healthcare system, particularly regarding its large HIV population.
President Donald Trump’s cancellation of the PEPFAR program, which previously allocated over $400 million annually, has raised concerns about the sustainability of AIDS-related services, despite domestic funding already covering 74% of South Africa’s HIV response. The health ministry intends to consult on the allocation of state funds to mitigate the impact of these cuts, as stated by ministry spokesperson Foster Mohale.
Currently, the proposed budget must receive cabinet approval before progressing to parliamentary debates. Should it pass, ministries will gain access to the allocated funds; a rejection, however, would force new elections. Additionally, the budget includes a 5 billion rand ($271 million) investment in military forces, reinforcing South Africa’s commitment to regional peacekeeping amidst escalating conflicts.
To finance the increases in health, education, and security, the government will incrementally raise VAT; the first increase will occur in 2025–2026, followed by another in the subsequent year, raising the total rate to 16% by 2026–2027. Finance Minister Godongwana emphasized the necessity of this move to assure public services while addressing concerns from citizens and organizations, stating that “the increase is also the most effective way to avoid further spending cuts and to enable us to extend the social wage.”
In conclusion, South Africa’s attempt to bolster its health and defense sectors in light of significant cuts in U.S. aid reflects both the urgency of addressing public health needs, particularly related to HIV, and the pressing demands on the national budget. The proposed increase in VAT, while controversial, is considered essential for funding this expanded budget amidst economic challenges. As the nation navigates this complex financial landscape, careful consideration of the impact on citizens’ living costs will be crucial.
Original Source: abcnews.go.com
