Godongwana Faces Tough Fiscal Dilemma: SRD Grant or VAT Hike?

South Africa’s Finance Minister, Enoch Godongwana, is at the center of a fiscal debate that could significantly impact millions of citizens. With growing financial pressures on the government, Godongwana has made it clear—either the Covid-19 Social Relief of Distress (SRD) grant is reduced, or a VAT increase becomes inevitable.

Initially introduced as a temporary relief measure during the pandemic, the SRD grant has been extended multiple times and is now set to expire in March 2026. However, its continuation comes at a hefty price—over R35 billion annually. The government is struggling to fund this social assistance without increasing taxes, leading to heated discussions on alternative revenue sources.

Earlier this year, a proposal to raise VAT from 15% to 17% was tabled, aiming to generate R58 billion for critical social programs and infrastructure development. However, the plan was met with fierce opposition from political parties and the public, citing the strain it would place on already struggling households. The Government of National Unity (GNU) postponed the February 2025 budget announcement amid internal resistance, leaving the issue unresolved.

With millions relying on the SRD grant, reducing or scrapping it could worsen poverty and fuel social unrest. On the other hand, increasing VAT would push up the cost of living, making essentials more expensive for South Africans. As the upcoming budget presentation looms, all eyes are on Godongwana to navigate this delicate balancing act—will the government prioritize economic stability or social support?