South Africa’s Revised Budget Faces Political Rejection Amid Economic Challenges
South Africa’s Finance Minister unveiled a revised budget proposing a smaller VAT hike, which was promptly rejected by the Democratic Alliance. The budget outlined aims to improve critical infrastructure over three years but faces challenges due to high unemployment and economic constraints.
On Wednesday, South Africa’s Finance Minister Enoch Godongwana presented a revised budget that proposed a smaller increase in value-added tax (VAT), raising it by one percentage point to 16 percent by the 2026/27 financial year. This adjustment was received unfavorably, particularly by the Democratic Alliance party, which announced immediate rejection of the budget. The initial proposal had suggested a two-percentage-point increase, which faced widespread opposition.
The revised budget includes a gradual VAT increase, which will be implemented in two phases, beginning with a 0.5-point increase in the 2025/26 period. Godongwana emphasized that rising tax rates on corporate or personal income would harm economic growth, while acknowledging that VAT is a tax that impacts all citizens.
South Africa experiences one of the highest unemployment rates globally, exceeding 32% and disproportionately affecting young individuals. The economy, growing at a mere 0.6% in 2024, is constrained by failing infrastructure and historical inequalities stemming from the country’s past governance.
Godongwana addressed the urgency of service delivery needs that align with the nation’s developmental objectives, detailing over one trillion rand ($54.4 billion) in proposed spending over three years on transport, energy delivery, and water projects. He noted that significant revenue remains uncollected due to underfunded tax services.
The Democratic Alliance criticized the budget, asserting that it would impoverish the populace and jeopardize the government’s future. They contend that the African National Congress (ANC) has not heeded advice against tax hikes and pledged not to support Godongwana’s budget without significant amendments.
In summary, South Africa’s revised budget, while proposing a reduced VAT increase, has faced significant backlash from key political parties, particularly the Democratic Alliance. Concerns over economic growth and service delivery are central to the response, reflecting broader challenges within the nation’s economy, which is hindered by high unemployment and inequality. The government’s spending proposals seek to address critical infrastructure needs but have sparked a contentious political landscape.
Original Source: www.france24.com
