South Africa’s revised budget proposed by Finance Minister Enoch Godongwana includes a 1% VAT increase, facing immediate backlash from the DA party and protests from civil groups. The budget aims to address infrastructure but is criticized for its potential economic impact amid high unemployment and poverty.
On Wednesday, South Africa’s Finance Minister Enoch Godongwana unveiled a revised budget amid protests from various civil groups, including unions and farmworkers. This followed resistance to an earlier proposal that suggested a 2% value-added tax (VAT) hike. The new plan proposes a 1% VAT increase, aiming to raise it to 16% by the fiscal year 2026/27 in two increments: 0.5% for 2025/26 and another for 2026/27. However, this announcement faced immediate backlash, particularly from the Democratic Alliance (DA), a key party in the coalition government, which rejected the budget outright.
The DA’s leader, John Steenhuisen, criticized the budget, emphasizing a commitment to pursue economic growth and job creation. Godongwana noted that no inflation-linked increases for personal income tax brackets were predicted, citing inflation rates of 3.2% in January. He argued that raising corporate or personal income taxes could detract from revenue generation while hindering investment and growth but acknowledged that VAT impacts everyone uniformly.
South Africa’s economy has experienced sluggish growth, with a mere 0.6% increase projected for 2024. Major challenges include a high unemployment rate exceeding 32%, severe inequalities persisting since the apartheid era, and a significant portion of the population living in poverty. The budget outlines over R1 trillion (about NZ$95.1 billion) in planned spending over three years for critical infrastructure improvements, including transport, energy, and water sanitation initiatives.
Despite the proposed allocations, the DA warned that the current budget format would exacerbate poverty among South Africans and jeopardize the government’s future. They criticized the African National Congress (ANC), the dominant coalition party, for ignoring prior warnings against tax hikes.
The revised budget presented by Finance Minister Enoch Godongwana has stirred discontent due to its proposed VAT increase, which has been met with protests and rejection by the DA party. Despite outlining significant investment in infrastructure and service delivery needs, the budget highlights ongoing economic challenges, including high unemployment and poverty. Overall, the debate emphasizes persistent concerns regarding fiscal policies and their impact on South Africa’s economic recovery.
Original Source: www.nzherald.co.nz
