South Africa’s Government of National Unity (GNU) is grappling with intense disagreements over the national budget, with political parties clashing over how to address the country’s financial challenges. Central to this dispute is the proposed increase in Value-Added Tax (VAT), which has faced fierce opposition from several influential political figures.
Malema Denies ANC Involvement in VAT Discussions
Julius Malema, leader of the Economic Freedom Fighters (EFF), has rejected claims that the African National Congress (ANC) approached his party to discuss a proposed VAT increase of 0.75 percentage points. During his birthday celebration in Tembisa, Malema refuted reports in the Sunday Times, asserting that no official talks have occurred between the EFF and the ANC. Instead of endorsing a VAT hike, Malema advocates for higher corporate taxes and the introduction of a wealth tax as more equitable alternatives.
Economic Concerns Heighten Amid Budget Delays
The proposed VAT increase has exacerbated tensions within the GNU. Originally scheduled for 19 February, the presentation of the budget was delayed to 12 March due to disagreements over a suggested two-percentage-point VAT increase. The continued standoff has raised alarms about the nation’s economic stability, with Malema warning that the failure to pass the budget could lead to significant economic consequences, with South Africa “operating on autopilot.”
DA Criticizes VAT Increase as ‘Tone-Deaf’
The Democratic Alliance (DA), the second-largest party in the GNU, has strongly opposed the VAT increase. Mark Burke, the DA’s finance spokesperson, described the proposal as “tone-deaf,” arguing that it would destabilise South Africa’s already fragile economy. He accused the ANC of refusing to reduce unnecessary government spending and pushing for a tax increase that would negatively impact struggling South Africans.
The DA has instead called for cuts in wasteful government expenditure, including cutting funds for the Sector Education and Training Authorities and ending the South African National Defence Force’s (SANDF) deployment in the Democratic Republic of the Congo.
Other Political Parties Push Back
Several other political parties have also opposed the VAT hike:
- Patriotic Alliance (PA): Spokesperson Steve Motale emphasised strengthening the South African Revenue Service (SARS) to improve tax collection rather than raising VAT.
- GOOD Party: Secretary-General Brett Herron argued that VAT is a regressive tax that disproportionately burdens lower-income households and suggested a wealth tax as an alternative.
- Freedom Front Plus (FF Plus): Party leader Wouter Wessels warned that raising VAT would worsen unemployment and increase economic hardship.
Rise Mzansi: Spokesperson Mabine Seabe argued that if VAT increases are inevitable, more essential goods should be exempt from the tax to protect vulnerable households.
Conditional Support from Some Parties
While most parties have rejected the VAT hike, Al Jama-ah has expressed conditional support. Nisa Hendricks, a spokesperson for the party, stated that Al Jama-ah would back the increase if basic food basket items for social grant beneficiaries are exempted from VAT, and if the VAT rate is reduced to 10% by 2030.
Awaiting a Final Decision
The Inkatha Freedom Party (IFP), United Democratic Movement (UDM), and Pan Africanist Congress of Azania (PAC) have yet to formally comment on the VAT increase, although the IFP has previously opposed the proposal due to conflicts with the GNU’s commitments.
With the budget now slated for delivery on 12 March, the government is hoping for a resolution to the policy dispute during the critical meeting on 7 March, chaired by Deputy President Paul Mashatile. As the nation waits for a final verdict, the future of South Africa’s economic policies remains uncertain.
The upcoming Budget Speech holds significant weight for South Africa’s financial future, with the pressing question being whether the government will prioritise economic relief for its citizens or whether higher taxes will become an unavoidable reality.
