South Africa plans to increase health and defense spending following U.S. aid cuts, including a proposed 0.5% VAT increase to offset costs. The 2025 budget allocates 28.9 billion rand for health, with a focus on supporting medical personnel amidst a growing HIV crisis. The VAT rise, while necessary for funding, has drawn widespread criticism for its potential impact on citizens’ living costs.
In light of decreased U.S. aid, South Africa’s lawmakers have proposed an increase in funding for health and defense while simultaneously raising the value-added tax (VAT) by 0.5%. This adjustment is expected to elevate the cost of living for consumers by increasing prices on goods and services, including essential items such as food.
Finance Minister Enoch Godongwana announced an allocation of 28.9 billion rand (approximately $1.5 billion) to enhance health funding in the 2025 budget. This initiative aims to address the consequences of significant aid reductions from the U.S. during the Trump administration, which previously funded crucial health programs, particularly in HIV prevention and treatment.
The additional funds will support the salaries of roughly 9,300 medical professionals and 800 newly qualified doctors. Health spending is projected to rise from 277 billion rand in the fiscal year 2024/25 to 329 billion rand by 2027/28. This increase comes as South Africa’s health system faces substantial pressure, especially considering it has the largest HIV population globally, with over 5.5 million individuals relying on life-saving antiretroviral medications.
Following President Trump’s cancellation of PEPFAR, the major U.S. funding initiative for AIDS programs, South Africa must navigate reduced support that contributes around 17% to the nation’s overall AIDS response budget. Although most of the HIV response is domestically funded (74%), the U.S. cuts pose significant challenges.
Discussions on budget allocations will commence between the health ministry and stakeholders to address the funding gaps left by the loss of U.S. support. Ministry spokesperson Foster Mohale mentioned that details regarding assistance for affected parties would be announced soon, highlighting the complexities involved in reallocating resources under the current fiscal constraints.
The latest budget proposal requires cabinet approval and will undergo debate in parliamentary committees before a final vote. If approved, ministries will have access to allocated funds; otherwise, unsuccessful votes would lead to potential new elections and government resignations.
Additionally, an allocation of 5 billion rand ($271 million) has been designated to strengthen military capabilities, reflecting South Africa’s commitment to regional peacekeeping as conflicts escalate in eastern Congo. The government’s plan to raise VAT, relevant to all goods and services, including food, has drawn public criticism and discontent among political groups.
Minister Godongwana defended the VAT increase by emphasizing that it was a necessary measure to avoid cutting spending further while also funding essential services. The anticipated upward adjustment of VAT will raise the tax rate to 16% by 2026-2027, impacting all citizens directly. The administration argues that this cautious approach considers the implications on various socio-economic groups while maintaining crucial public services.
In summary, South Africa’s decision to increase health and defense budgets comes in response to reduced U.S. aid, necessitating adjustments like a VAT increase. The initiative aims to maintain essential health services and military readiness amidst funding challenges. While the budget awaits parliamentary approval, ongoing discussions will determine how best to address the gaps created by lost U.S. support, ensuring continuity in public health and safety efforts amid rising costs of living for citizens.
Original Source: abcnews.go.com
