Enoch Godongwana, South Africa’s finance minister, presented a revised budget proposing a smaller VAT increase, met with protests and immediate rejection from the Democratic Alliance. South Africa faces high unemployment and poverty rates, emphasizing the need for infrastructure investment amidst criticisms of tax hikes.
On Wednesday, finance minister Enoch Godongwana introduced a revised budget in South Africa amid protests against proposed austerity measures, particularly a 2% increase in the Value-Added Tax (VAT). This revised proposal includes a smaller adjustment of raising VAT by 1 percentage point to 16% by the 2026/27 financial year, to be executed in two increments.
The announcement was promptly met with disapproval from multiple members of parliament and specifically rejected by the Democratic Alliance (DA), a central party in the ruling unity government. DA leader, John Steenhuisen, emphasized their commitment to battling for economic growth and job creation, indicating a clear divide in political support for the budget.
Minister Godongwana noted that the government does not foresee inflation-related adjustments to personal income tax brackets for financing. He expressed concerns regarding corporate and personal tax increases, which could deter investment and hinder economic growth. Nevertheless, he recognized that VAT impacts every individual across the socioeconomic spectrum in South Africa.
Despite being Africa’s most industrialized nation, South Africa grapples with economic challenges, including a staggering unemployment rate exceeding 32% and widespread poverty affecting approximately two-thirds of its populace. The sluggish economy, with only a 0.6% growth in 2024, is constrained by inadequate infrastructure and severe power outages, attributed to past corruption and mismanagement.
The finance minister highlighted the necessity of addressing urgent service delivery demands essential for developmental objectives. The budget delineates over R1 trillion in projected expenses over three years towards improving transport, energy, and sanitation infrastructures. The treasury will also receive additional funding to enhance its revenue collection capabilities, targeting billions currently uncollected.
However, the Democratic Alliance criticized the budget’s impact, stating it would adversely affect the populace while jeopardizing the efficacy of the government. They declared their intention not to support the budget in parliament, thereby opposing the ruling party’s tax increase approach.
In conclusion, South Africa’s revised budget has been met with significant resistance, primarily due to proposed tax hikes, particularly a modest VAT increase. As the nation continues to face high unemployment and poverty rates, the government emphasizes the importance of infrastructure investment while facing challenges in garnering bipartisan support for fiscal changes. The economic outlook remains concerning, warranting decisive action to stimulate growth and address inequalities.
Original Source: www.nzherald.co.nz
