The recent decision by Minister of Finance Enoch Godongwana to raise the Value-Added Tax (VAT) by 1 percentage point over the next two financial years has sparked a wave of mixed reactions across South Africa, reports Cape {town} Etc.
Critics argue that this move serves as a significant betrayal to the hard-working residents of the Western Cape, particularly those among the poor and working classes, who will feel the immediate financial strain.
Western Cape Government Premier Alan Winde voiced his discontent, stating, ‘This budget should not be funded at all by an increase in VAT, and I am disappointed that national government has not made the tough choices needed, particularly at the beginning of a term of office. Our priorities must be fast-tracking economic growth reforms, cutting wasteful expenditure, and reprioritising spending.’
Winde remarks underscore a growing sentiment among local officials who feel the burden of increased taxation should not disproportionately impact the most vulnerable in society.
Moreover, Premier Winde stressed the necessity of implementing hard decisions early in a government’s term, asserting that no salary increase for government employees should exceed the inflation rate.
‘We must stop bailing out State Owned Enterprises (SOEs) and in fact we must dramatically cut the number of SOEs. The cost of corruption is still crippling our country,’ he remarked, reflecting a desire for systemic changes in fiscal policy.
Echoing these sentiments, Western Cape Minister of Finance Deidré Baartman described the VAT hike as ‘unconscionable’ given the already dire financial circumstances faced by households.
Addressing the rationale behind the tax increase, she added, ‘While Minister Godongwana claims the VAT increases are to fund pressures facing provinces, particularly core frontline services such as health and education, the national government has chosen the one option that will hit the poor and middle-class the hardest.’
Baartman called for better alternatives that would not place additional burden on taxpayers.
Beyond the western region, the Beer Association of South Africa (BASA) expressed disappointment with Godongwana’s announcement of a 6.75% increase in Excise Duties.
BASA CEO Charlene Louw warned that such increases could hinder growth and job creation in the beer industry, which is a crucial element of the nation’s economic framework.
‘Increasing excise taxes beyond inflation especially by 2% above CPI hinders growth and job creation. Coupled with the 0.5% VAT increase, the financial burden on both businesses and consumers is even more severe,’ she stated, calling for a balanced tax approach that considers the realities of industry growth.
Further complicating the financial landscape, Deal Leaders International CE Corporate and Advisory Andrew Bahlmann pointed out that while there was no increase to corporate income tax this year, South Africa still ranks high on corporate tax burdens, deterring foreign direct investment (FDI).
He highlighted a distressing 28% fall in mining sector receipts, emphasising the need for tighter control on government spending, which is projected to rise annually above inflation by 5.6% over the next few years.
Meanwhile, the Western Cape Commissioner for Children (WCCC) and her Child Government Monitors (CGMs) have welcomed the budgetary allocations made by Minister of Finance Enoch Godongwana in the 2025/2026 budget.
‘Despite the VAT increase, there are positive developments in the budget that align with the WCCC and CGMs’ recommendations in the 2023 National Medium Term Budget Policy Statement.
‘Notably, the budget allocates an additional R10 billion over the medium term to increase the Early Childhood Development (ECD) subsidy from R17 to R24 per day per child, which will support approximately 700,000 more children. This increase is a significant step towards enhancing access to quality,’ WCCC said.
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Picture: Jeffrey Abrahams / Gallo
