Labour federation Cosatu has called on parliament to amend the 2025/26 budget to scrap the contentious VAT hike and amend the budget with more progressive revenue options to stimulate economic growth and create much-needed jobs.
In its submission on the budget to parliament on Tuesday, Cosatu called for the R370 social relief of distress (SRD) grant to be adjusted for inflation and for an increase in funding for public employment programmes and industrial and export financing.
Finance minister Enoch Godongwana delivered the budget speech in parliament on March 12 after it was postponed on February 19 when parties in the government of national unity (GNU) could not agree on a proposed two percentage points VAT increase.
The minister announced during the budget Treasury opted for a half a percentage point hike in each of the next two years, with the proposed increases set to generate R13.5bn in revenue in 2025/26, R30bn in 2026/27 and R32bn in 2027/28.
Public infrastructure spending over the next three years will top R1-trillion to grow the economy and create jobs. Spending is set to focus on three sectors: transport infrastructure (R402bn), energy infrastructure (R219.2bn) and water infrastructure (R156.3bn).
However, Cosatu parliamentary co-ordinator Matthew Parks said while there are many progressive provisions that Cosatu campaigned for in the budget, “its primary source for funding these with an unnecessary 0.5% VAT hike for each of the next two years and not adjusting personal income tax brackets for 2025 will be a painful blow to millions of highly indebted working-class families and an already battered economy”.
“Cosatu cannot support tax hikes on the working class and the poor and thus calls upon parliament to reject this ill-considered bleeding of workers’ already meagre wages and amend the budget with more progressive revenue options.”
He said VAT was regressive and hurt the poor who already could not afford to buy food, electricity or pay for transport.
“The decision not to adjust tax brackets for low- and middle-income workers is deeply regrettable when they are already drowning in debt with their overstretched wages not keeping pace with inflation. These tax hikes will now make the lives of millions even more difficult.”
Parks called for a “bold and decisive Marshall Plan” to capacitate the state, stimulate growth and slash unemployment.
“We do not have endless time to make the bold changes our many socioeconomic crises demand. Cosatu will be seeking further engagements with government on these burning matters.”
Some opposition parties including the DA have rejected the budget, saying it is “a punch to the gut of already struggling South Africans”.
On public services, Parks said additional medium-term expenditure framework (MTEF) allocations to frontline services, in particular education (R29bn), health (R28.9bn), home affairs (R3bn), defence (R11.7bn) and correctional services (R2.6bn) “will help repair damage inflicted by previous austerity budget cuts”.
“The commitment to hiring more teachers, doctors, nurses, home affairs, police and border management officers, among other critical frontline personnel will boost public services; but details on when this will be done, and the exact numbers must be provided,” he said.
“We welcome the additional allocation of R46.7bn to bring the total MTEF spending for infrastructure to R1.03-trillion, in particular roads (R402bn), water (R156bn) as well as investments in rail, ports, new hospitals and 13,000 university beds. Parliament needs to crack the whip on government to ensure these funds are spent timeously and support locally produced materials. Law enforcement must tackle the construction mafia hindering many construction projects.”
If parliament has not passed the budget by April 1, the Public Finance Management Act, the cornerstone of SA’s financial management, provides a fallback, allowing government spending to continue based on the previous year’s budget allocations.
The government of national unity (GNU) comprises the ANC, DA, Rise Mzansi, Al Jama-ah, IFP, PA, GOOD, the PAC, FF+ and the UDM. These parties represent 70% of the seats in the National Assembly.
Without the DA, which has 87 seats in the National Assembly and is the second-largest party in the coalition government, the budget is unlikely to receive enough votes to pass, unless the GNU looks outside for support.
The Sunday Times reported that the ANC had held meetings with the EFF to secure its support to get the budget over the line.
With Thando Maeko
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