South Africa’s Finance Minister announced a revised budget, proposing a 1% VAT hike met with protests and disappointment from opposition parties. The Democratic Alliance expressed intent not to support the budget, emphasizing concerns over economic growth and taxation. The country continues to grapple with severe unemployment and poverty, with the economic outlook remaining bleak.
On Wednesday, South Africa’s Finance Minister Enoch Godongwana introduced a revised budget amidst protests from unions and civil society against austerity measures, including a proposed increase in value-added tax (VAT). The revised budget suggested a 1 percentage point increase in VAT to 16% by the 2026/27 financial year, which was a reduction from the prior proposal of a 2-point increase, but was met with immediate disapproval from the opposition.
The new VAT plan includes an initial 0.5-point increase for the 2025/26 fiscal year and another increase in the following year. Despite the moderate adjustment, parliamentarians expressed their displeasure, and the prominent Democratic Alliance party announced its refusal to support the budget. DA leader John Steenhuisen reiterated their commitment to addressing economic growth and job creation.
Finance Minister Godongwana highlighted that the government does not intend to raise personal income tax brackets in line with inflation, which recently reached 3.2%. He argued against increasing corporate or personal income tax rates, stating that such actions would likely lead to diminished revenue, affecting investment and employment.
South Africa, while being the most industrialized country on the continent, faces significant economic challenges, including an unemployment rate exceeding 32%, one of the highest globally, particularly impacting youth. Inequality remains pervasive, with two-thirds of the population estimated to live in poverty. The sluggish economy experienced just a 0.6% growth rate in 2024, hindered by infrastructural issues and power outages.
The budget outlines over R1 trillion (approximately NZ$95.1 billion) allocated to enhance the transport infrastructure, energy systems, and water and sanitation projects over three years. The tax service will receive funding to bolster its revenue collection efficiency, as billions in potential revenues remain uncollected.
The DA criticized the current budget as detrimental to the economic wellbeing of South Africans, asserting that it threatens the future of the government. They accused the governing African National Congress party of neglecting the warnings against heightening tax burdens, thereby vowing not to support the budget in parliamentary voting.
In conclusion, the revised South African budget unveiled by Finance Minister Enoch Godongwana has faced significant backlash despite the scaled-back increase in VAT. The Democratic Alliance and others expressed their opposition, citing concerns over economic growth and social welfare. The government faces immense challenges, including high unemployment and poverty rates, and the proposed budget may not garner the necessary support in Parliament, complicating the nation’s financial recovery efforts.
Original Source: www.nzherald.co.nz
