South African VAT Hike Sparks Criticism: Corporate Interests vs Public Welfare
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In response to Finance Minister Enoch Godongwana’s budget speech delivered on Wednesday, political analyst and senior lecturer at the University of Limpopo, Dr. Metji Makgoba, expressed strong concerns regarding the government's proposal to increase Value Added Tax (VAT).
He described the move as an inevitable consequence of a neoliberal agenda that prioritises corporate interests over the wellbeing of ordinary citizens.
Godongwana's budget speech focused on several key themes, including the allocation of resources to address pressing economic challenges and the need for fiscal responsibility.
He announced a budget that includes increased funding for essential services such as education and healthcare while also introducing a controversial increase of 0.5% in Value Added Tax (VAT) to support government revenue.
“The increase in VAT is a reflection of the government’s commitment to a neoliberal policy framework that systematically benefits corporations while leaving the most vulnerable behind,” Makgoba stated.
He argued that under such an agenda, the state resorts to “propaganda and lies” to legitimise policies that exacerbate unemployment, hunger, and exploitation among marginalised communities.
“They know that the increase cannot be justified because the inequalities have been increasing, yet they proceed regardless,” he emphasised.
The independent analyst highlighted a troubling trend: that the South African government appears to be more accountable to multinational corporations and large businesses than to its citizens.
“Neoliberal policies systematically expand corporate influence while marginalising the poor, reinforcing structural inequalities,” he remarked.
In this context, poverty is often misattributed to individual failures rather than the systemic economic exclusions that perpetuate it.
“Creating a pro-poor budget within a neoliberal dictatorship is impossible,” Makgoba asserted.
He pointed out that the state increasingly outsources its key political responsibilities, which undermines its ability to directly tackle social and economic crises. “A socialist economy could resolve many of these crises,” he added, advocating for a more interventionist approach to governance.
Makgoba argued that neoliberal ideology strongly discourages state intervention.
“The dominant discourse on development in South Africa promotes the belief that private sector involvement in governance equates to progress, modernity, and efficiency,” he explained.
He argued that this prevailing mindset often leads to policies that favour market-driven solutions, even when they fail to address the deep-rooted economic inequalities faced by many South Africans.
As the nation grapples with the implications of the 2025 budget, Makgoba called for a critical reassessment of the government’s priorities and the systemic changes necessary to create a more equitable society.
According to Godongwana, the government proposed a VAT rate increase by half a percent point in 2025/26, and by another half a percent point the following year, which will bring the VAT rate to 16% in 2026/27
The South African government's 2025/26 budget faces an uncertain future with the DA announcing its intention to withhold support due to the proposed increase in VAT.
The second largest party in the Government of National Unity (GNU) said they would not be voting for the budget in its current form spelling trouble for the government's budgetary plans which relies heavily on coalition cooperation.
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