South Africa’s lawmakers propose increased funding for health and defense while raising VAT by 0.5%, impacting the cost of living. An additional 28.9 billion rand is earmarked for health, affected by U.S. aid cuts. The budget awaits parliamentary approval amidst growing public concern regarding the VAT increase.
Lawmakers in South Africa are focusing on bolstering budgets for health and defense while simultaneously proposing a 0.5% increase in Value Added Tax (VAT), leading to an anticipated rise in the cost of living. This measure is expected to raise the prices of consumer goods and services, further straining the economy that is already under pressure.
In the 2025 budget, an additional 28.9 billion rand ($1.5 billion) has been allocated for health expenditures. Finance Minister Enoch Godongwana stated this additional funding aims to compensate for cuts in aid from the United States, which were initiated during the Trump administration. The funding would allow for the hiring of approximately 9,300 medical personnel and 800 newly qualified doctors in clinics and hospitals.
The total spending on health is projected to rise from 277 billion rand in 2024/25 to 329 billion rand in 2027/28. This increase is critical as the nation’s health system faces challenges in supporting the world’s largest HIV population, particularly with reduced funding from USAID due to prior U.S. policy changes.
The cancellation of PEPFAR by President Trump has put further pressure on South Africa’s health initiatives. While 74% of the HIV response is funded domestically, 17% still relies on U.S. government support. The health ministry is planning consultations to strategize the allocation of funds to mitigate the effects of these funding cuts.
Foster Mohale, spokesperson for the health ministry, stated, “It’s too early to tell you how we are going to assist those affected by the funding freeze… how we’re going to use this budget to try to cover some pressure areas.”
The proposed budget awaits cabinet approval and will undergo parliamentary scrutiny. If it passes, the allocated funds can be utilized by the respective ministries, whereas rejection would trigger new elections.
Furthermore, an allocation of 5 billion rand ($271 million) is designated to enhance military capabilities, emphasizing South Africa’s dedication to peacekeeping amid escalating conflicts in eastern Congo. To support increased expenditures on health, education, transportation, and security, VAT is scheduled for incremental increases, reaching 16% by 2026–2027. This decision has ignited backlash from various political and civic groups.
In response to criticisms, Minister Godongwana defended the VAT increase, stating, “VAT is a tax that affects everyone… its distributional effect and impact were cautiously considered.” He emphasized that raising VAT is a feasible strategy to avoid further cuts to essential services and facilitate extending the social wage.
In summary, South Africa’s government is shifting its financial focus towards health and defense, necessitated by reduced U.S. aid. While additional funds aim to strengthen the health system significantly, the proposal to raise VAT has sparked public concern. Comprehensive consultations will guide the allocation of resources, and parliamentary approval is pivotal in implementing these budgets. Overall, the South African administration is balancing economic strain with essential services amidst changing global aid dynamics.
Original Source: abcnews.go.com
