JOHANNESBURG (AP) — Lawmakers in South Africa laid out plans to shore up the budgets for health and defense but also put up value added tax by 0.5%, a move that will raise the cost of living as consumers pay more for goods, including food, and services.
An additional 28.9 billion rand ($1.5 billion) was earmarked for health spending in the 2025 budget, Finance Minister Enoch Godongwana said, as the country scrambles to make up for cuts to aid from the U.S. under the Trump administration.
The extra money will pay the salaries of roughly 9,300 medical personnel in clinics and hospitals and about 800 newly qualified doctors.
Health spending overall is expected to grow from 277 billion rand in 2024/25 to 329 billion rand in 2027/28.
The increase comes amid concerns that South Africa’s health system, which cares for the world’s largest HIV population and has 5.5 million people on life-saving antiretroviral drugs, will be strained by cuts to USAID, the U.S. agency for international development.
In early February, President Donald Trump cancelled PEPFAR, the President’s Emergency Plan for AIDS Relief, which provides over $400 million annually to South Africa’s HIV programs and nongovernmental organizations.
Although 74% of South Africa’s HIV response is funded domestically, some services depend on U.S. government funding, which makes up around 17% of the nation’s AIDS response budget.
Despite South Africa being one of Africa’s most developed nations, it struggles with high debt rates and slow GDP growth.
The health ministry will shortly begin consultations on how to divide up state funds, including allocations to fill the gaps left by the U.S. cuts, ministry spokesperson Foster Mohale said.
“It’s too early to tell you how we are going to assist those affected by the funding freeze,” said Mohale. "But we’ll be able to communicate (soon) how we’re going to use this budget to try to cover some pressure areas.”
The latest budget has not yet been approved by the cabinet. Parliamentary committees will debate the budget in the coming weeks before putting it to a vote before the full legislature. If it passes, the ministries are free to use the funds as allocated. However, if Parliament rejects it, new elections are convened, and the administration resigns.
Some 5 billion rand ($271 million) was ringfenced to beef up military forces, said Godongwana, reaffirming South Africa's commitment to peacekeeping in the region as fighting intensifies in eastern Congo.
To fund additional spending on health, education, transportation and security, the government plans to raise the consumption tax, or VAT, by half a percentage point in 2025–2026, sparking outrage from political and civic organizations.
VAT is payable on goods and services including food and electricity.
Another half a percentage point will be introduced in the following year, putting the rate of VAT at 16% by 2026–2027.
“VAT is a tax that affects everyone. By opting for a marginal increase to VAT, its distributional effect and impact were cautiously considered,” said the finance minister, attempting to fend off jeers from lawmakers. “The increase is also the most effective way to avoid further spending cuts and to enable us to extend the social wage.”
FILE - Minister of Finance of South Africa Enoch Godongwana arrives ahead of the state of the nation address by South African President Cyril Ramaphosa at the City Hall in Cape Town, Feb. 8, 2024. (Rodger Bosch/pool photo via AP, file)
