‘Alternative’ budget for South Africa with no tax hikes

The Democratic Alliance has presented its own budget proposal that will find extra money to fund government spending by cutting down the state’s “reckless” expenditure.

The party presented the proposal as the Government of National Unity (GNU) cabinet—which includes the DA—debates changes to the 2025 Budget that was shelved last week.

Finance minister Enoch Godongwana was forced to call off the Budget Speech on Wednesday (19 February) after tax proposals inside his budget drew the ire from parties within the GNU.

The main culprit was a proposed two percentage point hike in VAT to 17%, which would have raised an additional R68 billion to fund government’s increased spending.

Godongwana wanted to use the proceeds to plough more money into education and health—to keep doctors and teachers employed—as well as delivering above-inflation hikes to social grants and keeping the R370 SRD grant going for another year.

To soften the blow of the VAT hike, some beneficial tax proposals were included, such as broadening the zero-VAT basket of goods, keeping fuel taxes the same and adjusting income tax brackets slightly.

Responding to the budget, however, the DA said that it would not support taxes.

Following the ANC losing its majority in the 2024 national elections and the formation of the GNU, the party needs the DA’s support in passing the budget.

The DA is the second-biggest party in the GNU and the ANC cannot form a majority without them.

The DA’s spokesperson on Finance, Dr Mark Burke, said that an alternative budget could be drawn up that does not include any tax hikes and can still cover the government’s promised spending.

Tax hikes, he said, would put South Africa’s existing tax base under strain, and measures like the mooted wealth tax would only push investors away.

He said that the R60 billion in new expenditure that the National Treasury said it needs to fund is only 3% of the overall R1.9 trillion budget and this can be “easily be sourced from failing, failed and underperforming programmes and sub-programmes”.

“South Africa doesn’t have a revenue problem, it has a problem prioritising spending on programmes that drive growth and in turn job creation,” he said.

Cutting unnecessary spending

The DA said immediate cost-cutting measures could free up at least R60 billion without cutting essential services

This would require:

• 50% reduction in government advertising budgets.
• 33% reduction in travel and catering expenditure across departments.
• Hiring freeze for all non-essential government positions for 12 months.
• A national audit of “ghost employees”, following the PRASA audit that uncovered approximately 10% of their workforce didn’t exist

Pro-business growth measures

The party said that South Africa needs to drive economic growth, investment and job creations.

To this end, the government should prioritise:

• Fast-tracking logistics and trade reforms by setting clear deadlines for the concessioning of freight rail and major ports like Cape Town and Richards Bay.
• Establish a $5 billion (around R92 billion) concessional lending arrangement with the World Bank for high-impact urban infrastructure projects without adding to the national debt.

A Comprehensive Spending Review

The party said that Treasury needs to do a three-month emergency spending review to identify wasteful and failing programmes.

This would give it room to reprioritise R58 billion, it said. This would enable:

• Reallocation of funds to essential public services such as healthcare, policing, and education.
• The ability to fund legally mandated commitments, such as the R7 billion public sector wage increase, without tax hikes.
• The use of the Adjustment Budget Mechanism to shift spending as new revenue streams are unlocked.

“The government can also use adjustment budgets throughout the year, reallocating funds as inefficiencies are identified—no tax hikes are needed,” Burke said.

Increasing revenue without raising taxes

Burke said that instead of suffocating taxpayers, South Africa should focus on improving tax compliance and unlocking state assets.

• Increasing tax compliance from 63% to 67% can generate R60 billion per year.
• Selling underutilised state-owned land and properties could raise R10 billion per year.

This is a measure that SARS commissioner Edward Kieswetter gave tacit support to in the weeks ahead of the budget, where he said the taxman should be bolstered to chase down R800 billion in owed taxes.

The DA said that essential services should be protected in the budget, including no cuts to frontline healthcare workers, teachers, SAPS personnel, or social grants.

It also wants to see the SRD grant converted into a Job Seekers’ Allowance, ensuring that it supports employment-seeking efforts rather than simply being a state handout.

The GNU cabinet is currently debating the budget, with reports pointing to no agreement on the latest revision, which focused on cutting the planned spending for the year.

National Treasury and the GNU are sitting with the bleak reality that there is very little room to move with the budget and difficult choices will have to be made.

The budget is now scheduled to be tabled on 12 March.