On 12 March 2025, Finance Minister Enoch Godongwana will deliver South Africa’s much-anticipated National Budget Speech. After the unexpected cancellation of last month’s address, speculation has been rife about a possible 2% VAT increase. However, in a recent interview with the Sunday Times, Godongwana suggested that a VAT hike would not be necessary if the Social Relief of Distress (SRD) grant were removed.
The SRD grant, which was introduced as a temporary relief measure during the COVID-19 pandemic, has been extended multiple times despite concerns about its affordability. Godongwana made it clear that the ongoing cost of the grant is placing strain on the national budget.
“If you allowed me to cut the SRD, I wouldn’t increase anything. I’m faced with increased expenditures which are not in the budget.” – Enoch Godongwana
His comments have sparked intense debate, especially within the Government of National Unity (GNU), where political parties have strongly opposed the proposed VAT hike to 17%, arguing that it would disproportionately affect the poor.
Learn More: SASSA SRD Grant Faces Uncertainty: Could It End in March 2025?
Can South Africans Afford Another Tax Increase?
With government spending reaching unsustainable levels, tax hikes seem inevitable. However, leading economists are urging the government to cut expenses rather than increase taxes.
Economist Ulrich Joubert strongly opposes any form of tax increase, including the often-adjusted “sin taxes” on alcohol and cigarettes.
“The economy can’t afford any tax increases. Even the sin taxes must be reconsidered.” – Ulrich Joubert
Instead of raising more revenue through taxation, Joubert believes the government should focus on spending cuts, starting with the bloated Cabinet and excessive government perks.
“There is plenty of room to cut expenditure, starting with the number of cabinet ministers and the assistance we provide. It would send a strong message if the government starts at the top and demonstrates that they are serious about controlling costs.”
Similarly, economist Dawie Roodt warns that South Africa is borrowing too much money, leading to higher interest costs.
“The bottom line is simple: the state has been borrowing too much money. The debt has been going up too fast, and the interest on that debt just keeps on rising. We cannot borrow more money. That is just a given.” – Dawie Roodt
Roodt is firm in his stance against any tax increase, stating that the South African economy is already overburdened by excessive taxation.
“This economy cannot afford another tax increase. It doesn’t matter which tax it is. This economy has been overburdened by too many taxes for far too long.”
Economic Growth: The Key to a Stronger South Africa
South Africa’s economy has been struggling with sluggish growth, hovering around 0.6%—a rate far too low to create jobs and improve living conditions.
Joubert stresses that economic growth should be the government’s top priority.
“We need to create an environment in which the economy can start growing. Not at 0.6%, but at much better rates. A 2% growth target is manageable, even 3% would be better.”
South Africa has vast economic potential, but policy uncertainty, excessive government spending, and lack of private sector confidence continue to stifle growth. Joubert believes that creating a growth-friendly environment is the only way to ensure a sustainable future.
“The key is creating a growth-friendly environment so that we can start creating jobs.”
Cutting Government Waste Instead of Raising Taxes
If taxes aren’t the answer, where should the government find money?
According to Dawie Roodt, the only solution is to spend less. He argues that South Africa’s public sector wage bill is too high and that government departments should be streamlined.
“The only way to fix the budget is to spend less money. Politicians must spend less money. There is ample space to make cuts.”
He suggests reducing civil servant salaries, which have been growing at a rate above inflation, and even closing non-essential government departments like Small Business Development and Women and Children’s Affairs.
Additionally, wasteful spending on unnecessary luxuries—such as the blue light brigades used by government officials—should be eliminated.
By reducing waste, the government can stabilize the economy without increasing the financial burden on ordinary citizens.
How a VAT Increase Could Hurt South Africa’s Most Vulnerable
The possible 2% VAT increase is one of the most controversial proposals ahead of the 2025 Budget Speech. While increasing VAT would boost government revenue, it could also have devastating consequences for vulnerable groups, particularly non-profit organisations and shelters for abused women and children.
Impact on GBV Shelters
The National Shelter Movement of South Africa (NSMSA) has warned that a VAT hike could cripple GBV shelters, which already struggle with inadequate government funding.
“A 2% VAT increase will affect so many elements of our services that we may be forced to reduce the number of beneficiaries we take in because everything will go up.” – Nisaa Institute for Women’s Development
For nearly 20 years, GBV shelters have been appealing for more financial support. These shelters provide essential services for victims of gender-based violence, including:
- Safe housing for women and children escaping abuse
- Legal assistance for survivors seeking justice
- Trauma counselling and emotional support
- Skills development programs to help women regain independence
Yet, despite their crucial role in society, many shelters continue to operate on the brink of financial collapse.
Chronic Underfunding and Government Neglect
Dr Zubeda Dangor, Executive Head of NSMSA, stressed that the government has a responsibility to ensure that GBV shelters receive adequate funding.
“Government must recognise that its responsibility to provide shelter for abused women and children is just as important as providing social grants to the elderly or children with unemployed parents.”
Delayed and inadequate funding creates financial instability, making it difficult for shelters to continue their lifesaving work.
“When we request funding, it is never for excess but only to meet the urgent needs of survivors who rely on us for safety, healing, and a chance to rebuild their lives.” – Dr Zubeda Dangor
A VAT increase could further increase the financial strain, forcing shelters to turn away victims in need.
Will the 2025 Budget Speech Provide Real Solutions?
As South Africans brace for the 2025 Budget Speech, the nation is demanding real solutions to its economic problems.
The key concerns that need to be addressed include:
- Will VAT be increased, and if so, by how much?
- Will the government reduce unnecessary spending and cut Cabinet perks?
- How will the budget tackle economic growth and job creation?
- Will the government increase funding for GBV shelters and other essential services?
- What measures will be introduced to reduce national debt?
The 2025 Budget Speech presents a crucial moment for South Africa, with the government facing a difficult decision between raising taxes and cutting social spending. Finance Minister Enoch Godongwana’s remarks about scrapping the SASSA SRD grant to avoid a VAT hike have sparked heated debate.
While the grant has provided lifeline support to millions of unemployed South Africans, its financial sustainability is in question. The government is already struggling with high debt, a slow-growing economy, and a widening budget deficit. However, increasing VAT to 17% could further burden the poor and worsen economic inequality.
Economists argue that reducing wasteful government spending and cutting unnecessary expenditures—rather than increasing taxes or removing essential social grants—could be the best way forward. At the same time, the government must find ways to stimulate economic growth and create jobs, as unemployment remains one of the country’s biggest challenges.
As South Africans await the budget announcement, the key question remains: Will the government prioritize fiscal responsibility over social welfare, or will it find a balanced approach that ensures economic growth without abandoning the most vulnerable citizens? The answer will shape the country’s financial future for years to come.
Sources
- Sunday Times Interview with Enoch Godongwana – Discussion on VAT hike and SRD grant (Sunday Times)
- National Treasury Reports – South Africa’s budget spending and financial challenges (National Treasury)
- Statistics South Africa (Stats SA) – Unemployment rates and economic growth data (Stats SA)
- National Shelter Movement of South Africa (NSMSA) – Reports on funding challenges for GBV shelters (NSMSA)
- Economic Analyses by Ulrich Joubert and Dawie Roodt – Expert opinions on tax increases and economic policy (Financial Mail)
- Government of National Unity (GNU) Policy Debates – VAT policy and social grant discussions (Parliament of South Africa)
This budget speech will set the tone for South Africa’s economic future, and the decisions made will have long-term consequences for both taxpayers and those who rely on government support.
