South Africa is planning to enhance its health and defense budgets due to cuts from U.S. aid. A 0.5% increase in value-added tax is also proposed, affecting the cost of living. Finance Minister Enoch Godongwana revealed additional allocations for health and military, as the country strives to address critical funding challenges.
Lawmakers in South Africa have proposed an increase in spending on health and defense following cuts to United States aid. To finance these initiatives, the government plans to elevate the value-added tax by 0.5%. This tax increase is expected to exacerbate the cost of living as consumers face higher prices for various goods and services, particularly food.
Finance Minister Enoch Godongwana announced an allocation of an additional 28.9 billion rand (approximately $1.5 billion) for health in the 2025 budget. This funding aims to counterbalance reductions in American support resulting from policies enacted during the Trump administration. The budget increase will allow for the hiring of approximately 9,300 medical personnel and the integration of around 800 newly qualified doctors.
The total health expenditure is projected to rise from 277 billion rand in 2024/25 to 329 billion rand by 2027/28, driven by the urgent need to support a healthcare system that caters to the world’s largest HIV population. This population relies heavily on life-saving antiretroviral drugs, making any cuts to USAID, particularly the President’s Emergency Plan for AIDS Relief (PEPFAR), troubling.
In response to these cuts, which saw over $400 million annually withdrawn by the U.S., the Health Ministry is set to consult on budget allocation strategies, particularly focusing on deficits created by the reduced American funding. Ministry spokesperson Foster Mohale stated, “It’s too early to tell you how we are going to assist those affected by the funding freeze. But we’ll be able to communicate (soon)… how we’re going to cover some pressure areas.”
The proposed budget is pending cabinet approval and must pass through parliamentary debate before seeking a vote. Failure to pass the budget could trigger new elections and potential reconfiguration of the administration. Additionally, a separate allocation of 5 billion rand ($271 million) is reserved for strengthening military operations, particularly in light of escalating conflicts in eastern Congo.
To support increased spending across various sectors, including health and security, the government intends to boost VAT by 0.5% in the 2025-2026 fiscal year. This will be complemented by a further increase of the same margin in the subsequent year, placing the VAT rate at 16% by 2026-2027. Despite backlash from political and civic sectors, Minister Godongwana defended the decision, asserting, “VAT is a tax that affects everyone.” He emphasized that this increase was a judicious approach to mitigate the need for further expenditure cuts while still extending social welfare benefits.
In summary, South Africa is responding to cuts in U.S. aid by increasing its health and defense budgets. A planned VAT increase is set to escalate the cost of living for citizens, while additional funding aims to bolster health services and military capacities. The forthcoming budget must navigate parliamentary approval amidst considerable public scrutiny and criticism.
Original Source: abcnews.go.com
