Finance Minister Enoch Godongwana faces tough fiscal decisions as South Africa navigates balancing social relief distress and economic sustainability.
Image: Phando Jikelo / Parliament of SA
The ANC appears to be cutting a lone figure when it comes to increasing Value-Added Tax (VAT) ahead of the Budget Speech on Wednesday after its Government of National Unity (GNU) partners seemed to display a united front against the tax increment.
Godongwana is expected to announce a highly anticipated Budget Speech on Wednesday, amid speculation that he may increase VAT or cut government spending. The move has been met with resistance from various political parties, which have urged the minister to consider alternative measures.
The minister has been under fire this week after he reportedly said that he won’t raise VAT if he can cut the Covid-19 Social Relief of Distress (SRD) grants.
The speech was delayed last month due to disagreements over Godongwana’s proposed VAT hike.
A proposal to increase VAT by 2% (from 15% to 17%) was made earlier this year in an attempt to raise R58 billion shortfall to pay for essential infrastructure and social initiatives.
However, this plan was later abandoned, and the Budget Speech was postponed last month due to objections from GNU partners.
According to reports, Godongwana is considering a 0.5% increase in VAT, which has been met with opposition from fellow GNU parties such as the DA, the Freedom Front Plus (FF Plus), the Patriotic Alliance, the Pan Africanist Congress (PAC), and the GOOD Party.
DA finance spokesman Mark Burke was adamant that his party would not stand for any VAT increase.
"We're pushing for six elements in the Budget tomorrow (Wednesday)... First, no increase in VAT, Personal Income, or Corporate Tax rates. South Africans are already overburdened," Burke said.
The DA has proposed alternative measures, including reducing inefficient spending, allocating more money to the South African Revenue Service (SARS) to increase tax efficiency, and enacting pro-growth reforms.
The FF Plus has echoed similar sentiments, with new leader Dr Corné Mulder stating that the government should focus on cutting back on unnecessary expenses rather than increasing taxes.
"The previous VAT increase has already shown that VAT is not a goose laying golden eggs amid a bankrupt economy and impoverished community. The truth is that it will further stagnate the economy and exacerbate the economic crisis," Mulder said.
The GOOD Party has suggested alternative measures, including reducing the cap on tax-free retirement savings and implementing a wealth tax.
"The ANC is desperate to save face after last month's proposed Budget was washed up on the GNU rocks, and the DA is just as desperate to seize the moment to prove it has the power to put a spoke in the ANC's wheel," said GOOD secretary-general Brett Herron.
“Neither party’s position is pro-poor, or pro-justice. Though sharply differing in approach, both parties are effectively articulating the same business-as-usual approach to the Budget that has failed to narrow inequality or reduce poverty since apartheid ended 31 years ago,” Herron said.
PAC Secretary-General Apa Pooe said that his party firmly believes that any budgetary measures should be pro-poor and ensure that the burden of economic challenges does not fall on the most vulnerable in society.
“The government must prioritise the needs of the people by ensuring that essential services are adequately funded while maintaining fiscal prudence.
“The focus should be on efficient resource allocation, curbing wasteful expenditure, and fostering economic policies that uplift the marginalised. South Africans deserve a Budget that is people-centred, ensuring that no one is left behind,” Pooe said
The Patriotic Alliance has also urged the government to prioritise the needs of the people, ensuring that essential services are adequately funded while maintaining fiscal prudence.
The Congress of South African Trade Unions (Cosatu), an ANC alliance, has also expressed opposition to any VAT increase, stating that it would further deplete workers' already meagre wages and spike inflation.
Cosatu had suggested that Treasury start discussions with the Government Employees Pension Fund (GEPF) over a pension contribution holiday, but it remains to be seen if the idea will make the Speech.
"We hope that further engagements will take place, including after the Budget has been tabled at Parliament to ensure that we review the totality of government expenditure and revenue options," said Cosatu spokesperson Matthew Parks.
Official opposition parties, the EFF and uMkhonto weSizwe Party, have also rejected any increase in VAT, stating that the parties would not support any measure that would further burden the poor.
Cape Argus