Protesters demonstrating against proposed budget and social funding cuts ahead of Finance Minister Enoch Godongwana's budget speech in Cape Town on February 21, 2024. Instead of increasing VAT and entrenching austerity measures – marked by budget cuts and negative average medium-term expenditure growth affecting critical developmental priorities – the SACP calls for a budget that facilitates large-scale employment creation, says Alex Mashilo. Picture: AFP
Dr. Alex Mashilo
THE South African Communist Party (SACP) denounces and rejects, in advance, the budget to be tabled on Wednesday, February 19, 2025, by the Minister of Finance, Enoch Godongwana, if it entails an increase in Value-Added Tax (VAT).
Several domestic and foreign-controlled media reports, such as Bloomberg’s “South Africa May Need to Hike Value-Added Tax in Next Budget”, appear to form part of a wider propaganda campaign driven by a certain circle within the National Treasury.
This circle is pushing to increase VAT further after it was hiked from 14 per cent to 15 per cent in April 2018 against the explicit wishes of the working class.
The May 2024 election manifesto that we, as Alliance partners, endorsed commits the government to tackling the cost-of-living crisis by prioritising “food security, including through VAT exemption on essential items” – not increasing VAT.
What the National Treasury must do is introduce a wealth tax and a more progressive tax approach, focusing on generating revenue from the rich and wealthy to fund development and key priorities amid the high rates of inequality that characterise South Africa.
This measure is essential for redistributing resources and addressing the deeply entrenched disparities in income and opportunity. It will also ensure that the burden of funding public services is more equitably shared, promoting social cohesion and shared economic growth in line with the Freedom Charter’s clarion call, “The people shall share in the country’s wealth”.
The SACP will not stop at merely rejecting such a budget. We will embark on a deep-going process of mass mobilisation of the working class against it until victory is achieved and secured. This has far-reaching political implications.
The attempt to justify a VAT increase under the guise of the Social Relief of Distress (SRD) Grant, whose unemployed beneficiaries have been significantly reduced through austerity-driven red tape, is unfathomable. The unemployed – both those actively seeking work and those discouraged after years of looking for work without success under 28 years of neo-liberal policy failure – must not be used as “VAT-increase footballs”.
Instead of increasing VAT and entrenching austerity measures – marked by budget cuts and negative average medium-term expenditure growth affecting critical developmental priorities – the SACP calls for a budget that facilitates large-scale employment creation through broad-based industrialisation, towards the Freedom Charter’s right of all to work. To achieve this, the government must lead by example by investing directly in the economy, rather than relegating key leaders to uncritical marketing agents for private capital.
From a scientific perspective, increasing VAT disproportionately hurts the working class and the poor. VAT is a regressive tax that falls hardest on those who already endure economic deprivation. For households living on the pittance afforded by low wages or social grants, every VAT increase strips away what little purchasing power they possess.
Essential goods – such as food, electricity and transport – already make up the bulk of expenses for the poor. Further raising VAT would compound the high cost of living, forcing more families into deeper poverty.
Meanwhile, the rich – whose corporate income tax has been repeatedly slashed – will continue smiling all the way to the bank, untouched by the economic violence inflicted on workers and the poor.
The SACP reiterates its long-established position on austerity. In July 2022, the SACP stated:
“Austerity should not be confused with trimming perks for senior officials or ensuring greater value for money by cutting rent-seeking or tackling corruption. Such measures should all be part of normal, prudent management of public funds, which we would support. Neo-liberal austerity involves as its defining characteristics: (1) the prioritisation over all else of the achievement of predefined macro-economic balances and ratios deemed by the neo-liberal playbook to be universally applicable everywhere and under all circumstances; and (2) the achievement of these ratios by cutting government expenditure, even to the extent of cutting redistributive programmes and withdrawing from any real stimulus.”
Further, the SACP warned:
“Experience in many jurisdictions has shown that austerity often unleashes a vicious cycle. Cuts made to restore fiscal numbers promote stagnation. Stagnation reduces revenue collection, which leads in turn to more cuts.”
As an alternative, as the SACP suggested:
“An effective recovery programme – particularly one targeting greater inclusivity and cutting unemployment and poverty – would generate more resources for the fiscus. This, rather than austerity, should be the preferred route to fiscal sustainability.”
The SACP stands ready to take militant action alongside all progressive forces to roll back any regressive measures imposed on the working class, and we call on all workers and poor communities to unite in the fight for economic justice.
The SACP further expects a budget that will advance the implementation of the National Health Insurance as a critical step towards ensuring access to quality healthcare for all.
The budget must also take meaningful strides towards a comprehensive social security system by making tangible progress to advance the introduction of a universal basic income grant. Such measures are essential to providing economic relief and dignity to millions of impoverished households, addressing poverty and inequality head-on, and strengthening the social safety net.
Finally, a government that defers its solutions to unelected private capital betrays the very people it is meant to serve. For almost every problem – whether in electricity, rail, ports, water, or elsewhere – “the private sector is the solution” is uncritically claimed.
Although it does not deal much with policy capture, critically, the Report of the Commission of Inquiry into State Capture highlights the significant role played by the private sector, including Global North-controlled multinational auditing and consultancy firms, in crippling major public entities such as Eskom and Transnet, and in driving the state capture agenda at key public institutions such as the South African Revenue Services.
A critical analysis of the Commission’s findings reveals how unscrupulous private capital interests, through collusion with corrupt and capturable elements in the state, have actively contributed to the deterioration of public services and the erosion of state capacity in pursuit of profits.
To this end, dominant sections of the private sector have promoted privatisation and micro-economic liberalisation as policy instruments to capture state assets or functions.
The uncritical narrative that the private sector is the solution conveniently ignores this track record of plunder and destabilisation. Instead of this agenda, greater focus must be on rebuilding state-owned entities through recapitalisation, democratic control and accountability to the people.
* Dr Alex Mohubetswane Mashilo is a Central Committee Member, National Spokesperson and Political Bureau Secretary for Policy and Research of the South African Communist Party.
** The views expressed in this article do not necessarily reflect the views of The African.