The proposed 2% VAT increase threatens to deepen the financial struggles of low-income households reliant on essential goods and services.
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The two percentage point VAT increase that was proposed in the 2025 Budget Speech was a nightmare that would have affected lower-income households greatly.
This is according to Oliver Meth, the spokesperson for Black Sash, a non-profit human rights organisation, who said the poor and working class communities spent a huge portion of their income on VAT-rated essential goods and services.
Meth said while Treasury had sought to counter the VAT increase with above-inflation social grant increases, including a R150 increase for the old age and disability grant, an R80 increase for the foster care grant and a R50 increase for the child support grant, this would have not been enough to offset the pain caused by the mooted two percentage point VAT increase.
He said the VAT hike could lead to a decline in purchasing power for grant recipients, exacerbating financial strain on already vulnerable communities.
"The proposed social grant increases were a step in the right direction, but they fall short of adequately supporting beneficiaries in managing their households," Meth said.
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In the Budget Speech, which could not be presented on Wednesday after a revolt from ministers in the government of national unity over the proposed VAT increase, Treasury had intended to announce a social welfare package with an additional R23 billion.
"Spending on social grants is allocated an additional R23.3 billion. This is to ensure that low-income households are not left worse-off by the increase to the VAT rate," Finance Minister Enoch Godongwana had been expected to announce.
He was also set to announce the extension of the COVID-19 Social Relief of Distress (SRD) grant, to March 2026, at a cost of R35 billion.
"With rising costs of essential goods, particularly food, transport, and electricity, these increments do not fully cushion the most vulnerable against economic hardships. Many households that depend on these grants will continue to struggle to meet basic needs."
Meth said Black Sash was welcoming Treasury's plan to extend the SRD grant, as it continues to offer vital support to South Africans who are struggling to find employment and maintain financial stability.
However, there needs to be a clear long-term plan for sustainable social assistance that included potential reforms to make this grant permanent or transition it into a more comprehensive basic income support mechanism.
"Without such measures, many recipients will face uncertainty once the extension period ends.We urge the government to reassess the adequacy of social grant allocations and implement policies that ensure real financial relief for those who need it most," Meth said.
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Black Sash has expressed disappointment by the political wrangling within the Government of National Unity (GNU) that has resulted in the cancellation of the 2025 Budget Speech that was supposed to take place on Wednesday.
They said the Budget Speech was a lifeline for the poor, unemployed, elderly and children who rely on social grants. Any delay or uncertainty in allocations can have serious consequences such as food insecurity, deepened poverty, and the erosion of public trust in government institutions.
"The absence of this critical address leaves significant uncertainty regarding the allocation of resources to essential social assistance programs. While Black Sash supports the refusal of VAT increases, we disagree with the 11th hour nature of the cancellation," Rachel Bukasa, Executive Director, Black Sash said.
The inability of the GNU to put aside their differences to reach a consensus and prioritise the needs of the most vulnerable is aa failure of leadership.
Black Sash believes that the abrupt cancellation raises serious concerns about transparency, accountability as well as the commitment of government to address poverty and inequality.
The organisation said that ensuring social protection should be top priority, as SA is facing a growing cost-of-living crisis and vulnerable communities cannot afford delays in policy commitments and financial support.
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