Finance Minister Enoch Godongwana has highlighted the difficult fiscal decisions facing South Africa, particularly the choice between increasing Value Added Tax (VAT) or scaling back the Covid-19 Social Relief of Distress (SRD) grant.
According to reports, Godongwana stated that a VAT increase could be avoided if the SRD grant were reduced.
“If I could cut the SRD, I wouldn’t raise any taxes,” he said, pointing out that the government is dealing with rising expenditures not accounted for in the current budget.
This dilemma has become a major talking point as the country anticipates the upcoming national budget.
Originally introduced in 2020 as a temporary measure to support vulnerable citizens during the Covid-19 pandemic, the SRD grant has been extended multiple times and is now set to run until March 2026. It currently costs the state over R35 billion per year.
While Godongwana previously supported the grant, he acknowledged that its continuation would require identifying a sustainable source of revenue. He stressed that without new funding, maintaining the grant is financially unfeasible.
Earlier this year, a proposal to raise VAT from 15% to 17% was put forward as a way to generate R58 billion to support essential infrastructure and social programmes.
However, the plan faced strong resistance from within the Government of National Unity (GNU) and was ultimately scrapped. The February 2025 budget presentation was also postponed due to the ongoing disagreement.
Godongwana’s remarks underscore the broader challenge of balancing the need for social welfare with the country’s fiscal realities.
Increasing VAT could help fund the grant but would place additional strain on already struggling South Africans by raising the cost of living. Conversely, cutting the SRD grant would affect over eight million recipients and could worsen poverty and fuel public discontent.
Political parties across the spectrum, including the Economic Freedom Fighters (EFF) and the Democratic Alliance (DA), have criticised the idea of a VAT increase, warning that it would hurt low-income households the most.
As the budget is set to be tabled this week, the path forward remains uncertain, with government leaders under pressure to find a solution that balances economic stability with social responsibility.
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