South Africa Plans Budget Increases for Health and Defense Amid U.S. Aid Cuts

South Africa’s government intends to increase health and defense budgets and raise VAT by 0.5% amid cuts in U.S. aid, threatening consumer costs. An additional 28.9 billion rand will focus on healthcare needs, including personnel salaries. The budget awaits parliamentary approval, and tax increases have stirred public outrage while reaffirming commitments to social services and military enhancements.

Lawmakers in South Africa have revealed intentions to enhance funding for health and defense sectors while instituting a 0.5% increase in value-added tax (VAT), which is expected to elevate the cost of living for consumers. This financial strategy aims to address budgetary gaps due to reductions in U.S. aid under the previous Trump administration.

The 2025 budget allocates an additional 28.9 billion rand (approximately $1.5 billion) for health expenditures. Finance Minister Enoch Godongwana emphasized this funding surge is crucial for hiring approximately 9,300 medical personnel and 800 newly qualified doctors, as the nation grapples with significant healthcare demands. Health spending is projected to rise from 277 billion rand in 2024/25 to 329 billion rand by 2027/28.

This funding is particularly urgent as South Africa manages the world’s largest population of people living with HIV, with 5.5 million individuals reliant on essential antiretroviral medications. The impending cuts to USAID, especially with the cancellation of PEPFAR funding, threaten the nation’s AIDS response, especially as U.S. contributions account for roughly 17% of its budget in this area.

Despite South Africa being one of the continent’s more developed nations, the country faces challenges such as high debt levels and sluggish GDP growth. The health ministry plans to consult on the appropriation of state resources, including responses to funding withdrawals, according to spokesman Foster Mohale.

The proposed budget awaits cabinet approval and will undergo parliamentary debate. Success in the legislature permits the distribution of funds; failure may result in new elections and potential administration changes. The financial provisions include 5 billion rand ($271 million) designated for military enhancements, underscoring South Africa’s commitment to regional peacekeeping amid escalating conflicts in eastern Congo.

To finance additional health, education, and security spending, the government intends to raise VAT, beginning with a 0.5% increase in 2025-2026. A subsequent rise will further elevate the VAT rate to 16% by 2026-2027. Minister Godongwana defended the tax change, stating, “VAT is a tax that affects everyone. By opting for a marginal increase to VAT, its distributional effect and impact were cautiously considered,” which aims to lessen the necessity for further spending cuts while supporting social services.

In conclusion, South Africa’s plan to bolster health and defense spending amidst U.S. aid cuts highlights a significant shift in fiscal policy, including increased VAT rates that may impact the populace’s cost of living. The government’s commitment to healthcare funding, particularly in HIV services, is critical, though the proposed budget and tax increases invite scrutiny and debate within the legislature.

Original Source: abcnews.go.com