By Daanyaal Matthews
The upcoming budget speech takes place in an unprecedented paradigm, one where the nation awaits a delayed budget, a first in the history of the Republic, but also one that will take place under the auspices of a Government of National Unity that had previously delayed the budget speech due to internal struggles.
These struggles have primarily revolved around the prospect of a VAT increase, which the ANC has championed as a necessity to assist ailing state institutions and reinvigorate the public sector, but the notion of a VAT increase has been thoroughly rebuked by other parties within the GNU, who argue that alternatives must be found with parties like the Democratic Alliance calling for further cuts to government expenditure and zero tax increases.
While the political aspect of the upcoming budget speech is paramount to its success, the economic cost to South Africans has been the overwhelming concern for a populace that already struggles to make ends meet.
A recent press statement by the Democratic Alliance’s Doctor Mark Burke, DA Spokesperson on Finance, has given indication that the ANC is poised for a 0.75% increase to VAT and, if it cannot find consensus with its GNU partners, will look towards a partnership with the EFF. This prospective partnership with the EFF has already been reproached by the party’s leader, Julius Malema, and has seemingly only served to invigorate the DA, who have regurgitated their calls for no tax increases while stating that they will not be intimidated by the idea of the ANC working with the EFF.
For Professor Heinrich Bohlmann, Associate Professor in the Department of Economics at the University of Pretoria, the increase to VAT would have an immediate impact on the economy, but the optics around the decision would be unappealing to the majority of South Africans due to historic government waste.
“VAT is, in principle, not a bad choice to raise some revenue. It is a more sustainable option; our VAT rates are comparably low to many other countries if you look at the EU, but the problem with the VAT increase is not looking at that in isolation. It is the broader landscape, the politics of it, the fact that many South Africans are fed up with wastage and mismanagement,” said Professor Bohlmann.
The economist contends that the increase to VAT, and theoretical economic alternatives, would not amount to significant change unless the government reevaluates its method of action through thorough planning, stating:
“None of this, even the many alternatives we can speak about, very few of them will provide sustainable solutions without expenditure moderation and efficiency gains from governments sides; otherwise, we are plugging holes year after year.”
