Minister under fire for linking grants to VAT increase. Image credit: Townpress Newspaper
(The Post News)- Finance Minister Enoch Godongwana has been accused by the advocacy group Black Sash of “using” the SRD grant as leverage to gain acceptance for a VAT hike. Godongwana says reducing COVID-19 relief grants could avoid VAT increases due to unsustainable annual expenditure.
Godongwana says that millions more unemployed South Africans rely on the SRD grant for survival. He further continues, stating that should he be allowed to cut the SRD, he would not increase anything as he is faced with increased expenditures that are not within the budget.
Last week, members of the Government of National Unity (GNU) rejected Godongwana’s proposed 2% Value Added Tax increase. The proposal also faced widespread criticism from opposition parties. The MK Party has threatened a nationwide shutdown if the finance minister proceeds with the proposed VAT hike.
The most recent extension of the SRD grant is set to expire in March next year. Although the previous SRD grant was approved by Godongwana, he clarified that its continuation would mean identifying an alternative funding source. Godongwana further adds that should it continue, it will not be affordable; they’ll have to locate a revenue source.
The government proposed a 2% VAT increase to alleviate financial strain earlier this year. The goal was to raise R58 billion to pay for essential infrastructure and social initiatives. The proposal was then shelved, and the February 2025 budget address was postponed because of strong resistance within the GNU.
Rachel Rukasa, Black Sash Executive Director, indicated that millions depend on the SRD grant and accused the minister of putting poor people against each other.
The VAT hike would increase living expenses for struggling South Africans, despite generating crucial funds for grants and services. And cutting subsidies would affect over 8 million users, worsening poverty and potentially sparking social unrest nationally.
The EFF and DA have condemned the proposed VAT hike, citing concerns over the rising cost of living for low-income households. Although the budget is set to be tabled this week, it is still unclear whether it will be approved or not.
About the Author
