The South African Federation of Trade Unions (SAFTU) unequivocally rejects the recent budget speech delivered by Finance Minister Enoch Godongwana. This budget is completely divorced from the ongoing suffering and impoverishment of the majority of people living in this country. It says nothing about the deepening social crisis and completely ignores the persistently high levels of inequality. Instead, in the face of ongoing hunger, this government and Treasury ask, “Why don’t they eat cake?”
The International Monetary Fund has been increasingly vociferous that Godongwana cut our state budget, since Godongwana’s predecessor Tito Mboweni took a July 2000 loan for $4.3 billion. Since October 2020, South African state spending on services, per person, has shrunk by 18.1%. The IMF insists on another 3%/GDP budget cut from 2025-27. This represents an outrageous loss of sovereignty.
Another important feature of the budget is how little the capitalist class is being asked to contribute, what with the steady 27% tax rate and many allowable deductions, compared to the 50% rate that prevailed from 1985-92. Even Treasury’s ‘macro-economic outlook’ concedes that in a year in which the ruling party lost so many votes – from 57% in 2019 to 40% in 2024 – and therefore required alliances with several pro-capitalist parties, big business and the state amplified their investment strike, with a 3.6% decline in fixed capital formation. And the Treasury modelers who believe that will suddenly rebound to 5% – in part due to a rapid rise in exports (an additional 6.2% compared to 2023 levels) have forgotten to check the world economy and politics.
VAT Increase: An Unjust Burden on the Poor
The government’s decision to increase the Value-Added Tax (VAT) by 0.5 percentage points is a direct attack on the poor, who are already struggling under economic hardship. VAT is a regressive tax system that impacts the poor more than the rich. This increase will disproportionately harm the working class and the poor while leaving the wealthy and big corporations untouched. Evidence shows that past VAT increases failed to generate the expected tax revenue, while lowering consumer spending and worsening economic stagnation.
Ignored Alternatives: Taxing the Wealthy and Corporations
SAFTU, along with other progressive forces, has long demanded that Treasury tax the wealthy and big business instead of making the poor pay for the fiscal crisis. However, the government has completely ignored every alternative proposal to raising VAT. These alternatives include:
• 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 a 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.
These progressive taxation measures would generate R365 billion annually—eight times more than a VAT increase.
Austerity Measures: Deepening the Social Crisis
This government has no solution for the deepening social crisis, mass unemployment, and the collapse of the state. Instead, it continues to encourage the early retirement of 30,000 public sector workers, even spending an additional R11 billion for early retirement packages. It wants municipalities to be better at getting people to pay for services, but this is impossible given that people are unable to afford to pay.
The introduction of the fiscal anchor—for a primary budget surplus until 2030—means we are going to see more austerity for the foreseeable future, and this is completely undemocratic.
Privatisation and Public-Private Partnerships: Prioritising Profits Over People
There is an increase in privatisation and Public-Private Partnerships (PPPs), particularly aimed at de-risking private sector investment and guaranteeing profits. This approach prioritises the interests of big business and private capital over the needs of the majority.
SAFTU’s Demands
SAFTU calls on all workers and communities to unite in rejecting this anti-poor, pro-capitalist agenda. We must intensify the struggle against austerity, privatisation, and the continued erosion of workers’ rights. We demand:
• An end to budget cuts and austerity measures.
• The mass hiring of public sector workers to fill vacancies in education, healthcare, and policing.
• The expansion of social grants and the introduction of a Basic Income Grant.
• A shift towards public investment and industrialisation to create decent jobs.
• The rejection of privatisation and PPPs in favour of strengthening state-owned enterprises and public services.
SAFTU will continue to mobilise for mass action against austerity, privatisation, and the rising cost of living. The working class cannot afford to remain passive while the government sacrifices our future for the sake of the rich. The fightback continues!
Forward to mass mobilisation! Forward to a People’s Budget!
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
