US aid cuts to SA expected to weigh on spending

The decision by the United States to cut aid to South Africa is expected to add some expenditure pressures on the national budget. As Finance Minister Enoch Godongwana prepares to deliver the budget in Parliament this afternoon, analysts say government finances may face increased pressure having to fund health projects after the Trump administration cut its spending on aid, including the President’s Emergency Plan for AIDS Relief (PEPFAR).

A court ruling over what it called unconstitutional requirements for the application of the Social Relief of Distress grants may also call for an increased budget allocation should the government’s appeal be unsuccessful.

Dr Nthabiseng Moleko from Stellenbosch University explains, “There’s no way that the R8 billion loss that is estimated from the withdrawal of aid and the compensation of employees for thousands of workers is likely to have been budgeted for and planned in the short space of time that we have.

“So the seriousness of it is that the cut in expenditure from the aid support is gonna have a devastating consequence on those programs, particularly the TB and HIV related programs.”

Tax hike

Meanwhile, the  Economic Freedom Fighters (EFF), uMkhonto weSizwe (MK) Party and the Democratic Alliance (DA) ganging up against any possible tax hike, it remains to be seen if Finance Minister Enoch Godongwana will table his 2025 budget without any glitch.

After being forced to postpone the tabling of his budget last month due to disagreement amongst GNU partners over the 2% VAT increase, Godongwana will now deliver his budget in Parliament later today.

Speculation is rife that he might increase the VAT by 0.75%.

But the DA spokesperson Willie Aucamp says they will not support any tax increase either VAT or corporate.

“We will not support any increases in taxes, whether it’s VAT, personal income tax or company/corporate tax. South Africa does not have an income problem, we have an expenditure problem. We need to look at places where we can cut our costs and lower our debt. SARS commissioner made it clear that they can up their efficiency to collect more R60 or R80 billion.”