South Africa intends to increase health and defense budgets amid U.S. aid cuts while raising VAT by 0.5%, impacting living costs. An additional 28.9 billion rand is planned for health in 2025, supporting medical personnel and addressing HIV care. The VAT increase has sparked public outcry, but the government asserts it’s necessary to avoid further spending cuts.
South Africa plans to enhance budget allocations for health and defense while implementing a 0.5% increase in value-added tax (VAT), which will raise living costs for consumers. Lawmakers aim to raise an additional 28.9 billion rand ($1.5 billion) for health in the 2025 budget, due to aid cuts from the U.S. under the Trump administration. This funding will support the salaries of around 9,300 medical staff and approximately 800 newly qualified doctors.
Health spending is projected to increase from 277 billion rand in 2024/25 to 329 billion rand by 2027/28. This budget comes in light of concerns regarding the strain on South Africa’s healthcare system, which supports the world’s largest HIV population and approximately 5.5 million people on antiretroviral medications. Cuts to USAID programs pose a significant risk, as President Trump recently canceled PEPFAR, which provided over $400 million annually for HIV initiatives in South Africa.
Although a substantial portion of South Africa’s HIV response is funded domestically, about 17% relies on U.S. funding. Despite being a developed African nation, South Africa faces high debt and slow economic growth. The health ministry plans to begin consultations on reallocating state funds to address the funding shortfall from U.S. cuts. Foster Mohale, health ministry spokesperson, indicated that details on assistance for affected areas will be released soon.
The proposed budget must be approved by the cabinet and debated by parliamentary committees before a vote. If ratified, ministries can utilize the funds; otherwise, new elections will be prompted. Additionally, 5 billion rand ($271 million) is allocated to strengthen military forces, highlighting South Africa’s commitment to regional peacekeeping amidst unrest in Congo.
To support increased spending on health and other sectors, the government intends to raise VAT by another 0.5% in 2026-2027, bringing the total to 16%. This prospective increase has drawn criticism from various political and civic organizations. Finance Minister Enoch Godongwana defended the VAT hike, asserting its minimal impact and essential role in preventing further budget cuts while enhancing the social wage.
South Africa’s budget proposal aims to bolster health and defense funding primarily due to reduced U.S. aid. Key measures include a significant VAT increase, which is intended to cover budget shortfalls and maintain essential services. The approval process for this budget is critical and will ultimately determine the country’s ability to address ongoing health challenges and external pressures while upholding social welfare.
Original Source: abcnews.go.com
