GNU’s first budget delivers a devastating blow to South Africans

IN a move that can be aptly described as a “punch to the gut” of already struggling South Africans, the Government of National Unity (GNU) tabled its first budget in Parliament today, announcing a series of tax hikes and fiscal measures that are set to place an even heavier burden on the country’s citizens’ overstretched tax base.

The most contentious decision is the VAT hike, which will rise by 0.5 percentage points annually over the next two years to reach 16% by 2026. Meanwhile, the government refuses to adjust personal income tax brackets, rebates, and medical tax credits for inflation, effectively forcing working families to pay more income tax while receiving fewer benefits.

“This budget is a punch to the gut of already struggling South Africans,” Bosa said in a scathing statement after the budget speech delivery. “Working families will pay more in tax on at least two fronts to foot the bill for the government's unjustifiable choices.”

ActionSA echoed these sentiments, unequivocally rejecting the proposed VAT hike. “ActionSA unequivocally rejects the proposed 1 percentage point increase in VAT—0.5 percentage points this year and 0.5 next year—as well as the hidden tax increase caused by the failure to adjust personal income tax brackets for inflation,” the party said in a statement after the budget speech delivery. “These measures will quietly extract more from hard-working South Africans while state corruption, mismanagement, and waste continue unchecked under the coalition government.”

BOSA slammed Finance Minister Enoch Godongwana’s budget as a missed opportunity to stimulate economic growth, accusing the GNU of choosing increased taxation over effective fiscal reform. The GNU’s decision to squeeze an additional R28 billion in tax revenue from the dwindling tax base also drew sharp criticism, particularly as the government has clearly failed to implement meaningful cuts to unnecessary spending.

“By choosing increased taxation over effective fiscal reform, the GNU has missed the economic growth train, leaving South Africa stuck in a stagnant or even declining economy,” Bosa said.

ActionSA also took note of the disproportionate impact of VAT on the poor and the stealth tax imposed by the failure to adjust tax brackets for inflation. “While VAT may be the most efficient of the major taxes, it disproportionately harms the poor. At the same time, the refusal to adjust tax brackets for inflation amounts to a stealth tax—pushing ordinary workers into higher tax brackets without an actual salary increase,” the party said. “The result? South Africans are expected to pay an additional R18bn simply to bankroll government waste, failed policies, and corruption.”

The organisation warned that the budget did very little to address the country’s deepening economic crisis, with spending spiralling out of control, debt rising, and the tax base continuing to shrink.

Bosa raised the alarm over the possibility of a national “budget blowout” in the coming years, which it described as “the ultimate legacy of the GNU’s economic mismanagement”. “As spending spirals out of control, debt rises, and the tax base continues to shrink, a national ‘budget blowout’ in the coming years is now a real and alarming possibility,” read Bosa’s statement.

ActionSA slammed the government’s justification for the tax hikes, arguing that the measures should be funded by cutting wasteful spending rather than squeezing taxpayers. “The government claims these tax hikes will fund above-inflation increases in social grants, VAT zero-rated food items, and fuel levy relief. Yet these measures should be covered by cutting wasteful spending—including redundant Deputy Minister positions and failing government programs—rather than squeezing more from taxpayers,” the party said. “The truth is that ordinary citizens are being forced to pay for government failures, while those responsible for looting the state face no consequences.”

Bosa also lambasted the government’s decision to increase social grants, arguing that it did not offset the impact of VAT hikes, which drive inflation. “Increasing grants does not offset the impact of VAT, particularly because increases to VAT drive inflation. Expanding grants without a larger tax base is a crisis in the making,” the organisation warned.

The organisation proposed a series of alternative measures that it argued would have freed up tens of billions of rand without worsening the citizens’ tax burden. These include freezing middle and upper management hiring, reducing state-owned enterprise (SOE) bailouts, streamlining administrative and executive costs in provincial government, closing unnecessary diplomatic missions, reducing the Cabinet size, abolishing VIP protection for politicians, consolidating government marketing entities, and reforming the Road Accident Fund (RAF).

“VAT hikes were not the only solution. There were alternative paths available,” Bosa said. “Instead, the GNU has chosen the easy way out—extracting more from the hardworking citizens of South Africa while protecting its own political interests.”

ActionSA welcomed the additional funding allocated to the SA Revenue Service (Sars) but warned that the broader economic outlook still remained deeply concerning. “ActionSA has long called for proper funding of Sars, a demand that has gained wider recognition. South Africa faces a tax gap of R450bn annually, with an additional R400bn in uncollected revenue. That’s R850bn left on the table,” the party said. “To this end, we welcome the additional R3.5bn allocated in the current financial year and an extra R4bn over the medium term, as announced in the Budget Speech. This increase will help Sars collect more revenue and combat illicit trade—a victory for the people of South Africa.”

However, the party expressed concern over the downward revision of GDP growth for 2024 to a mere 0.8%, compared to 4.2% in other emerging markets and in sub-Saharan Africa. “The government projects 1.9% growth for 2025, but without meaningful economic reforms, this remains nothing more than a pipe dream,” ActionSA said.

The budget comes at a time when South Africans are grappling with a skyrocketing cost of living, with everyday essentials such as food, transport, electricity, school fees, and rent becoming increasingly unaffordable. Household debt continues to climb, inflation drives up bond repayments and rental costs, and economic growth remains stagnant.

“The cost of living has skyrocketed—everyday essentials such as food, transport, electricity, school fees, and rent are now beyond the reach of many,” Bosa said. “Yet, the government persists in its reckless spending, relying on loans to service other loans. It is clear that the future of our children is being mortgaged to pay for the failures of today’s mismanagement.”

ActionSA also highlighted the collapse of ArcelorMittal SA’s long steel business, which jeopardises up to 100 000 jobs, as a symptom of the ANC’s failed industrial policies. “The collapse of ArcelorMittal SA’s long steel business is the latest example of the ANC’s failed industrial policies,” the party said. “The company cites prolonged weak economic conditions, failing infrastructure, and unsustainable competition from low-cost imports as reasons for its closure—challenges that extend across the economy.”

The party also criticised the broad-based black economic empowerment (BBBEE) framework, which it said had been hijacked by ANC cronies. “Instead of broad-based empowerment, it has become a vehicle for elite enrichment, corruption, nepotism, and cadre deployment while failing to uplift the majority of black South Africans,” ActionSA said.

Adding to the economic crisis is the ANC’s destructive foreign policy, which alienates key trading partners. “Instead of fostering growth, the government’s diplomatic blunders actively harm the economy, costing South Africans jobs and investment,” the party said.

Bosa vowed to continue fighting for real economic solutions that stimulate growth, create jobs, and reduce wasteful government expenditure. “Bosa will continue to fight for real economic solutions that stimulate growth, create jobs, and reduce wasteful government expenditure, rather than punishing taxpayers for government’s failures,” the statement read.

As South Africans brace for the impact of the new budget, the GNU faces mounting criticism for its failure to address the country’s economic challenges while placing an even heavier burden on its citizens. The question remains: At what cost will this budget come, and who will bear the brunt of its consequences?