Finance Minister Enoch Godongwana faces backlash over fiscal policies and proposed VAT increases in his 2025 budget speech.
Image: Independent Newspapers
The 2025 proposed budget presented by Minister of Finance Enoch Godongwana on Wednesday has sparked strong opposition from various political parties, each offering critical perspectives on the government’s fiscal policies.
While the ANC argues that the budget is essential for fiscal responsibility, opposition parties have sharply rejected key elements, particularly the proposed Value Added Tax (VAT) increase, as well as what they perceive as a lack of substantial economic reforms.
In his budget speech, Godongwana proposed that the country’s VAT rate will increase by 0.5 percentage points in both 2025 and 2026, bringing the VAT rate to 16% by 2026 and 2027.
The Economic Freedom Fighters (EFF) has condemned the 2025 budget, labelling it a product of "right-wing neoliberal" policies.
EFF spokesperson Sinawo Tambo argued that the budget does not adequately address the needs of the poor and working-class South Africans, instead prioritising the interests of multinational corporations.
Tambo stated: "The EFF reiterates that South Africa does not have a guiding economic policy framework that links government spending with sustainable economic growth, development, and job creation to reduce poverty and inequality."
The EFF’s major concern is the proposed VAT increase of 1% over two years, which the party believes will disproportionately burden the poor and middle class. Tambo said: "A delayed and prolonged increase in VAT over a two-year period remains detrimental to the poor and middle-class and is an unviable option to generate revenue."
The EFF also criticised the government's ongoing privatisation of state-owned enterprises, such as Eskom, and the failure to invest in strategic economic development. According to the party, the budget continues to neglect the country’s most vulnerable citizens by focusing on private sector interests rather than public welfare.
The Democratic Alliance (DA) echoed the EFF’s opposition to the VAT hike but framed their critique around the ANC government's failure to implement necessary economic reforms.
The DA had previously made it clear to the ANC in the Government of National Unity (GNU) that they would not support any permanent tax hikes unless accompanied by major reforms to foster economic growth and reduce waste.
"The DA made it clear to the ANC in the GNU that we would not support any increase in taxes unless those increases were temporary, and the ANC agreed to a series of major reforms that would grow the economy, create jobs, reduce waste, and bring down taxes within three years," according to DA leader John Steenhuisen.
The DA argues that the ANC’s insistence on two permanent VAT hikes will further strain South Africa’s citizens. According to the DA, the government’s failure to embrace meaningful reforms demonstrates a lack of understanding of the country’s broader economic challenges.
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The Freedom Front Plus (FF Plus) also condemned the proposed VAT increase, warning that it will stifle economic growth. FF Plus chairperson Wouter Wessels stated that any VAT increase would be detrimental, advocating instead for tax relief to stimulate sustainable growth.
Wessels added: "The Freedom Front Plus (FF Plus) maintains that a VAT increase in any form is detrimental and will hamper economic growth. Tax relief should be offered instead to ensure sustainable growth."
In addition to opposing the VAT hike, FF Plus criticised the financial burden placed on taxpayers by Black Economic Empowerment (BEE) policies. They argued that these policies lead the government to overpay for goods and services, exacerbating the country’s financial challenges.
Wessels further stated: "Ordinary South Africans are paying the price for BEE, which is nothing but cadre enrichment through inflated prices for goods and services, running counter to all sound economic principles."
FF Plus advocates for more responsible government spending and a shift away from BEE-driven policies to foster economic growth.
Meanwhile, Free SA has seized the opportunity provided by the 2025 budget to advocate for significant restructuring of the cabinet to reduce government expenditure. The organisation argues that South Africa's current cabinet structure is one of the largest and most expensive in the world, suggesting that streamlining it could save substantial taxpayer money.
The organisation proposed reducing the cabinet size from 77 to 26 members, potentially generating annual savings of at least R130 million.
''Free SA proposed a reduction of the cabinet to a lean and efficient structure comprising no more than 26 members: the president, deputy president, and 12 ministers, each supported by one deputy minister.
''This reorganisation would immediately generate substantial annual savings of at least R130 million from salaries alone, while further reducing billions currently spent on ministerial budgets, administrative overhead, and infrastructure leases.'
"Streamlining the cabinet will not only save substantial taxpayer money but also enhance efficiency, transparency, and accountability in public administration,'' said Reuben Coetzer, spokesperson for Free SA.
Their proposal includes devolving certain responsibilities to provincial governance and consolidating overlapping ministries.
''Suggested eliminations include ministries such as Basic Education, Employment and Labour, Health, and Police, whose functions could be effectively managed at the provincial level, enhancing accountability and responsiveness to local needs.''
Coetzer emphasised that such changes would ensure better governance and more effective fiscal management.
Free SA also recommends the closure of ineffective ministries including the Minister of the Presidency, Minister for Women, Youth and Persons with Disabilities, Communications and Digital Technologies, and several others. Consolidation proposals include merging infrastructure-related ministries and combining the Justice ministry with Correctional Services to streamline administration and reduce unnecessary expenses.
They have called for President Cyril Ramaphosa to consider these recommendations in the interest of all South Africans, who deserve an efficient, responsive government.
ActionSA has been vocal in its opposition to both the VAT increase and what it views as a “hidden tax increase” due to the government's failure to adjust income tax brackets for inflation. The party contends that these measures will disproportionately impact hardworking South Africans while government mismanagement continues unchecked.
"ActionSA unequivocally rejects the proposed 1 percentage point increase in VAT — 0.5 percentage points this year and 0.5 next year — as well as the hidden tax increase caused by the failure to adjust personal income tax brackets for inflation,'' said ActionSA's Member of Parliament Alan Beesly.
The party also criticised government wasteful spending and corruption, urging the ANC to cut redundant positions and programs to alleviate the burden on taxpayers.
However, they did welcome the additional funding allocated to the South African Revenue Service (SARS) to combat tax evasion, emphasising that increased revenue collection from illicit trade could help mitigate some of the financial challenges.
hope.ntanzi@iol.co.za
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