The South African Federation of Trade Unions (SAFTU) strongly condemns the Treasury and SA Reserve Bank’s continued pursuit of extreme neoliberal policies, which have deepened austerity and economic inequality. The lack of democratic oversight over these institutions has led to repeated failures, including the imposition of the disastrous GEAR policy in 1996 and the ongoing fiscal austerity that has crippled public services.
The ANC’s alliance with the DA in the Government of National Unity has only exacerbated the problem, as seen in the Finance Minister’s failed 19 February budget proposal, which sought to impose a 2% VAT increase. The withdrawal of this budget after public backlash underscores the need for organised labour to propose alternatives that prioritise the working class over corporate interests.
Austerity’s Devastating Impact
Since 2020, austerity has resulted in an 18% decline in real per capita state spending, leading to:
- Severe underfunding of essential services such as healthcare, education, and policing.
- A worsening investment strike by the private sector, with gross fixed capital formation stagnating.
- Unemployment remaining at crisis levels, with 41.9% of South Africans jobless.
The VAT hike is a direct attack on the poor, who are already struggling under economic hardship. Evidence shows that past VAT increases failed to generate the expected tax revenue, while lowering consumer spending and worsening economic stagnation.
Rejecting VAT Hikes: Progressive Revenue Alternatives
SAFTU rejects the argument that a VAT hike is necessary to raise revenue. Instead, we propose progressive taxation measures that will generate R365 billion annually—eight times more than a VAT increase:
- Corporate Tax Reform – Reverse the 2022 corporate tax cut and increase rates to 32%, generating R60 billion.
- Wealth Tax on the Richest 1% – A progressive wealth tax on individuals with net worth over R50 million can raise R35 billion.
- Financial Transactions Tax – A 0.1% tax on financial trades (stocks, derivatives, forex) can generate R80 billion.
- Crackdown on Illicit Financial Flows – Strengthening SARS to stop corporate tax dodging will recover R60 billion.
- Luxury Goods Tax – Higher taxes on luxury cars, private jets, and imported designer goods will raise R15 billion.
- Ending Corrupt Procurement & Tender Fraud – Cleaning up public sector contracts can save R40 billion.
Urgent Need for Investment in Public Services
Instead of austerity, SAFTU demands massive public investment to stimulate growth, create jobs, and improve service delivery. This includes:
- Expanding social security – Raising the SRD grant and implementing a universal Basic Income Grant.
- Restoring public sector employment – Filling vacancies for nurses, teachers, and police to improve service delivery.
- Reversing privatisation – Rejecting public-private partnerships that allow corporations to loot public resources.
- A debt audit – Investigating illegitimate debts incurred during state capture and apartheid-era economic crimes.
Our Demands
- Scrap the VAT Increase – No more burdening the poor.
- End Austerity – Increase public investment in infrastructure, education, and industrialisation.
- Higher Taxes on the Rich & Corporations – Make the wealthy pay their fair share.
- Expand Social Security – Ensure social grants keep pace with inflation.
- Hold Corrupt Officials & Big Business Accountable – Enforce lifestyle audits and prosecute corporate tax dodgers.
Conclusion
South Africa does not face a fiscal crisis—it faces a crisis of political will. The government must abandon austerity, reject VAT hikes, and implement a bold, redistributive economic agenda that serves the majority, not the wealthy elite.
We reject VAT hikes, austerity, and privatisation!
We demand investment, job creation, and tax justice!
A Statement was issued on behalf of SAFTU by General Secretary Zwelinzima Vavi.
For more details, contact the National Spokesperson at:
Newton Masuku
066 168 2157
Newtonm@saftu.org.za
