Budget: Social Grants to Increase and VAT Goes Up

Protesters called on Finance Minister Enoch Godongwana to lift taxes on foodstuffs ahead of the budget on Wednesday. Godongwana announced that VAT would be increased but the list of VAT-exempt food items would be expanded.

Finance Minister Enoch Godongwana announced increases to social grants during his budget speech on Wednesday. From 1 April

• the Old Age and Disability grants go up to R2,315 a month, up R130 or 5.9%;
• the Child Support Grant goes up to R560 a month, up R30 or 5.6%; and
• the Foster Care Grant goes up to R1,250 a month, up R7 or 5.9%.

The current inflation rate is 3.2%. The higher-than-inflation social grant increases are intended to help cushion grant beneficiaries against the VAT increase announced on Wednesday, the minister said.

The Social Relief of Distress (SRD) grant of R370 will stay the same and remain in place until at least March 2026.

Godongwana repeated in his speech previous statements that the SRD grant will become “the basis for the introduction of a sustainable form of income support for unemployed people.” A review of the grant will be completed by September 2025, Godongwana said.

The minister said the VAT rate would rise from 15% to 15.5% on 1 April and then to 16% in 2026/27. He said the list of zero-rated goods (on which no VAT is paid) would be expanded to include canned vegetables, dairy liquid blends, and organ meats from sheep, poultry and other animals.

Godongwana said personal income taxes would not be adjusted to take into account rises in wages. This means employees’ income tax will increase as they move into higher tax brackets. This plus the VAT increase would bring in additional revenue of R28-billion in additional revenue in 2025/26 and R14.5-billion in 2026/27, he said.

He said alternatives to the unpopular increase in VAT had been carefully considered. Increasing corporate or personal income tax rates would generate less revenue, he said, and taking on extra debt was “not feasible”.

“The amount is simply too large. The cost of borrowing would be unaffordable,” Godongwana said.

The Democratic Alliance has said it does not support the tabled budget. It is therefore unclear whether there are enough votes in Parliament to pass the budget in coming weeks.

An additional R19.1-billion has been allocated to the education budget to retain 11,000 teachers in the public sector.

Godongwana also announced an increase of the Early Childhood Development (ECD) subsidy, which is paid to registered ECD centres, from R17 per day per child, to R24 per day per child. The budget also allows for an additional 700,000 children under the age of four to benefit from ECD subsidies.

“Health spending will grow from R277-billion in 2024/25 to R329-billion in 2027/28 to support the equitable provision of public health services, including free primary healthcare,” said Godongwana.

Increases to the health budget will “keep about 9,300 healthcare workers in our hospitals and clinics. It will also be used to employ 800 post-community service doctors, and to ensure that our pharmacies do not run out of medicines.”

Godongwana did not mention American aid funding cuts in his speech. Money from America’s President’s Emergency Plan for AIDS Relief (PEPFAR), which goes to organisations that support the health system, has been disrupted by chaotic cuts.

Although the South African government’s provision of life-saving antiretroviral HIV medicines is 90% self-funded, the impact of PEPFAR cuts are expected to have a widespread impact on services previously paid for by PEPFAR. About 17% of South Africa’s HIV response was paid for by PEPFAR. Organisations and staff funded by PEPFAR provide essential services in testing, linkage to care, and supporting services.

Prior to the speech, Godongwana told reporters in a briefing that the Department of Health would assist with some of the shortfall, but no further information could be provided.

About 100 people from various civil society organisations under the coalition People Against Budget Cuts protested against VAT increases and budget cuts.

Earlier, People Against Budget Cuts, a coalition of civil society organisations, trade unions, and community groups, gathered near the venue of the budget speech to protest against the VAT increase and austerity measures.

Holding signs that read “Stop cuts to youth” and “No VAT hike. Tax the rich. Protect the poor,” protesters sang struggle songs and called for increased social spending.

In a joint statement, the coalition said austerity policies had led to job losses, wage freezes, and reduced funding for essential services such as healthcare, education, and housing. These cuts, they said, disproportionately affect poor and working class people.

Sinoyolo Ngantweni from Equal Education highlighted the student accommodation crisis, saying, “More than 500,000 students struggled to find housing at the start of the year. Budget cuts worsen inequality within the higher education system.”

Following Godongwana’s speech, Brian Ashley from the Alternative Information & Development Centre said the government had shown no intention of addressing the country’s social crisis. “The poor again are made to shoulder the burden of the economic crisis by having to bear the burden of a VAT increase, despite other measures to enhance government revenue. Nothing is done to tax the extremely wealthy in this country,” Ashley said.

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