VAT Increase
By Thabo Mosia
ANC SG Mbalula Defends VAT Increase as Necessary for Economic Stability. On Wednesday, African National Congress (ANC) Secretary-General Fikile Mbalula addressed the media at Luthuli House to outline the party’s response to the 2025 National Budget, presented by the Minister of Finance. Mbalula hailed the budget as a “decisive intervention” that prioritises job creation, economic growth, and service delivery while protecting the gains of South Africa’s democracy. The proposed VAT increase, set to rise by 0.5% points annually over the next two years to reach 16% by 2027, has sparked debate, but Mbalula insists it is a “carefully measured intervention” to stabilise public finances without hurting the poor, thanks to mitigation measures like an expanded zero-rated VAT basket and increased social grants.
Introduction: A Budget for All South Africans
The 2025 National Budget has ignited discussions across South Africa, with ANC SG Fikile Mbalula leading the charge to defend its key proposals, including a controversial VAT hike. Speaking at a media briefing at Luthuli House, Mbalula described the budget as more than just numbers—it’s about improving the “lived experiences” of South Africans. With a focus on job creation, infrastructure development, and social protection, the ANC views this budget as a step towards fulfilling the promises of the Freedom Charter, celebrated for its 70th anniversary this year. However, the proposed VAT increase to 16% by 2027 has drawn mixed reactions, with opposition parties like the Democratic Alliance (DA), Economic Freedom Fighters (EFF), and uMkhonto weSizwe (MK) Party voicing strong objections. This article explores Mbalula’s defence, the budget’s highlights, and the differing perspectives shaping South Africa’s economic future.
Mbalula’s Defence: VAT Increase for Economic Stability
Fikile Mbalula emphasised that the VAT increase, rising from 15% to 15.5% in 2025 and 16% in 2027, is essential to sustain government revenue amid economic challenges. “This is a balancing act among many options considered,” he said, highlighting the ANC’s commitment to protecting vulnerable households. To soften the impact, the government has expanded the zero-rated VAT basket to include more essential food items, addressing food insecurity. Additionally, social grants will see above-inflation increases, while the fuel levy relief will ease the burden on working-class families.
Mbalula argued that the budget directs 61 cents of every rand spent towards the “social wage,” reinforcing the ANC’s mission to uplift the working class and poor. This includes significant investments in education, healthcare, and infrastructure, which he believes will drive long-term growth. “Unlike opposition parties fixated on elite interests, the ANC remains committed to progressive economic policies,” he added, taking a swipe at critics.
Key Highlights of the 2025 Budget
The 2025 National Budget outlines ambitious plans to transform South Africa’s economy. A major focus is the R50 billion investment in infrastructure, aimed at repairing and expanding roads, railways, and ports. This initiative is expected to create thousands of jobs and strengthen the country’s industrial base, aligning with the ANC’s goal to integrate rural and township economies into the mainstream.
The Presidential Employment Stimulus will receive an additional R15 billion, building on its success in providing opportunities for hundreds of thousands of young South Africans. This funding will equip youth with skills to enter the formal economy, supporting the ANC’s “just transition” to a more inclusive economy.
In education, the budget expands the National School Nutrition Programme to reach 1.5 million more learners, ensuring no child goes to school hungry. It also retains 11,000 teachers and improves school infrastructure, while protecting funding for the National Student Financial Aid Scheme (NSFAS) to support higher education access.
Healthcare receives a boost with the rollout of new hospitals and clinics, the provision of essential medicines, and the employment of 9,300 healthcare workers, including 800 community doctors. These steps are part of the foundation for the National Health Insurance (NHI), which aims to provide quality care to all South Africans, regardless of income.
Opposition Reactions: A Divided Political Landscape
The VAT increase and budget proposals have sparked fierce opposition from political parties, each offering a unique perspective.
Democratic Alliance (DA)
The DA has strongly opposed the VAT hike, arguing it disproportionately harms the poor. DA Shadow Finance Minister, Dion George, stated, “This increase will erode the purchasing power of working-class families, contradicting the government’s claims of protecting the vulnerable.” The DA also criticised the ANC’s refusal to raise corporate taxes, accusing the party of shielding wealthy elites. Furthermore, the DA’s call to relax labour laws and abandon Black Economic Empowerment (BEE) policies has been met with accusations from the ANC of promoting a return to “apartheid economic privilege.” Recent reports from News24 (12 October 2024) highlight the DA’s push for greater fiscal responsibility, including demands to privatise state-owned enterprises, which the ANC rejects as anti-transformation.
Economic Freedom Fighters (EFF)
The EFF, led by Julius Malema, has condemned the budget as a “betrayal of the poor.” In a statement on X, the EFF argued that the VAT increase and reliance on social grants reflect the ANC’s failure to address structural inequality. They advocate for expropriation of land without compensation and a wealth tax on the rich, proposals the ANC deems unfeasible. According to IOL (15 October 2024), the EFF plans to rally communities against the budget, framing it as a tool to maintain “white monopoly capital.”
uMkhonto weSizwe (MK) Party
The MK Party, under Jacob Zuma’s leadership, has echoed the EFF’s sentiments, calling the budget a “sell-out” to international lenders like the IMF. In a press release cited by SABC News (14 October 2024), the MK Party demanded a complete overhaul of tax policies, including higher taxes on corporations and the wealthy, to fund social programmes. They also oppose the NHI, claiming it will be mismanaged, a view supported by their criticism of ANC governance.
Other Parties
Smaller parties like the Freedom Front Plus (FF+) and ActionSA have also weighed in. The FF+ supports the DA’s call for fiscal restraint but opposes the NHI, citing concerns over costs, as reported by BusinessTech (13 October 2024). ActionSA, meanwhile, has proposed a middle ground, suggesting targeted tax relief for small businesses to boost job creation, a suggestion Mbalula dismissed as impractical given current economic constraints.
Broader Context: Economic Challenges and Global Trends
South Africa’s economy faces significant hurdles, including a 32.1% unemployment rate (Statistics South Africa, Q2 2024) and slow GDP growth of 0.6% in 2023 (World Bank). The VAT increase comes amid rising living costs, with inflation at 4.6% in September 2024 (Stats SA). Globally, countries like Kenya and Nigeria have also raised VAT to stabilise finances, providing a precedent for South Africa’s approach, as noted in a recent BBC Africa article (10 October 2024).
The ANC’s focus on infrastructure and the NHI aligns with global trends towards sustainable development and universal healthcare, as seen in initiatives by the African Union. However, critics argue that without addressing corruption—estimated at R500 billion lost annually (Treasury Report, 2023)—these investments may not yield the desired results.
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