South Africa’s Finance Minister Enoch Godongwana remarked that the national budget may be further adjusted as political discussions continue over a proposed VAT increase. Major parties, particularly the Democratic Alliance, oppose the budget and tax hikes, posing challenges for its approval by parliament.
Finance Minister Enoch Godongwana announced that South Africa’s national budget may undergo further adjustments. This comes as discussions between political parties continue over the controversial plan to increase value-added tax (VAT). Despite proposing a reduction in the VAT hike from 2 percentage points to 1 point over two years, major parliamentary parties have largely rejected the revised budget.
Godongwana’s African National Congress (ANC) requires the collaboration of at least one significant party to approve the budget. However, the Democratic Alliance, its main coalition partner, is firmly opposed to any tax increases, as are various other prominent parties outside the coalition. This budget presents a significant challenge for the ANC, marking its first loss of parliamentary majority since apartheid ended.
In a recent interview, Godongwana mentioned, “There will be engagement which may lead to some amendments in the budget. It is the nature of the thing.” He expressed his willingness to consider proposals from lawmakers while emphasizing the essential trade-offs involved in any potential adjustments.
Godongwana argued that eliminating the VAT, which contributes 14 billion rand in additional revenue, necessitates identifying alternative cuts in expenditure. He indicated that suggestions to reduce the cabinet size would not generate sufficient savings to support critical services such as health and education. “If they scrap the VAT… they must then say from an expenditure side what should be scrapped,” he stated.
He further noted that the current budget could prove to be the most contentious in several years, given the government’s reluctance to raise taxes in the near future. Godongwana believes that the budget, projecting a peak in public debt next fiscal year and a gradual deficit decline over the following three years, may receive a favorable assessment from ratings agencies, contingent upon its approval in parliament. “That’s a test we’ve got to pass,” he remarked.
In summary, Finance Minister Enoch Godongwana has highlighted the potential for alterations to South Africa’s budget amidst ongoing discussions among political parties. The proposed VAT increase remains contentious, especially given the ANC’s loss of its governing majority. Challenges persist, as the need for collaboration with other parties is crucial for the budget’s passage, with ramifications for essential service funding on the horizon.
Original Source: www.tradingview.com
