JOHANNESBURG - With the high cost of living millions of South Africans are already struggling to put food on the table, and this could be even more difficult should Value Added Tax (VAT) be increased.
Yet this is what government proposed to generate more revenue.
On Wednesday, Finance Minister Enoch Godongwana planned to announce an increase of 2-percentage points in VAT during the 2025 budget speech
However, objections within the Government of National Unity forced the minister to delay his speech.
Critics argue that increasing VAT would come at a dire human cost, especially for the poor.
It would drive up the cost of living, fuel inflation and increase unemployment.
With the budget now on hold until March, the question remains how can government increase revenue without deepening poverty?
‘Cutting wasteful expenditure is a key solution’
Economist Dawie Roodt argues that government can swell its coffers by reducing wasteful spending, which according to a 2022 Parliamentary Monitoring Group statement, is valued at R1.5-billion over five years.
This fruitless and wasteful expenditure took place in 41 national departments, of which 21 were labelled consistent delinquents.
Other expenses, according to the Parliamentary Monitoring Group, include leakages due to poor project management skills, cancellation of travel arrangements and damage to state buildings.
Roodt has also criticised the R20-billion transformative fund used to assist black-owned and small-business enterprises over the next five years.
President Cyril Ramaphosa supported the fund during the 2025 State of the Nation Address, saying it would ‘transform our economy and make it more inclusive’ by empowering black people, woman and persons with disabilities, who have been ‘deliberately’ excluded.
However, Roodt disagrees, saying it is unaffordable given the country’s current financial constraints.
Similarly, the National Health Insurance (NHI) requires money that is just not available, he adds.
‘Foster global relationships’
Besides reducing wasteful spending, Roodt suggests that government look at strengthening relations with global partners, especially the United States.
This is despite the frosty relationship between the two countries, as the US reviews and shifts its foreign policy.
Roodt believes that fostering this relationship could attract more foreign investment, and boost the country’s economic growth.
It would also create a positive economic environment, which would see businesses invest more in the country, driving economic growth.
‘Why VAT increase was initially considered reasonable’
According to the 2025 Budget Speech, Treasury suggested increasing VAT as it is a ‘reasonable’ choice to ease financial pressure on health, education, transport and security.
The speech revealed that the increase would help expand early childhood development, retain teachers, doctors and frontline workers, and provide above-inflation increases to social grants for the vulnerable.
‘Voters seeking stability and economic growth’
Former Statistician-General Pali Lehohla has a different view.
He says Treasury should rather talk about impact of economic policy on poverty and inequality.
“It must be that by how much will we change the livelihoods of the poor and not how much economic growth will get. You cannot drive a country by not measuring impact. And impact includes challenges like poverty, unemployment and inequality,” he says.
Lehohla argues that voters want stability and economic growth.
“The elite which consists of 13% black people who are the elite in the top quintile and 73% of whites also in that top quintile quivering about what needs to be done for them to continue benefiting. This has nothing to do with the suffering of the majority of the population. If it was, we would do something different about it. And we would not have as a country agree to people pulling out their pensions in the two-pot system. Because the two-pot system means even those who are working will retire in poverty,” he adds.