South African Finance Minister today confirmed the fears of value-added tax (VAT) increase. This was a highly expected address by South Africans and other parties around the world. Minister tabled a VAT increase by half a percentage point during each of the 2025/26 and 2026/27 financial years, bringing total VAT to 16%.

This confirmation of an increase of half a percentage point has not received a warm welcome from the tourism industry. The increase comes at a time when South African consumers faces an aggressive inflation. Minister Godongwana however did however present an attractive public infrastructure spending over the next three years. This would amount to more than R1 trillion. This budget allocation to infrastructure is critical for economic development.

Tourism Analyst Sthandiwe Mkhize said that the Tourism industry needs to rethink its approach to advocacy and lobbying. It’s time to pay some attention to the budget allocation earmarked for related sectors such as Transport, Logistics and general infrastructure. The deterioration of these sectors directly impact on the progress, image and economics of the tourism industry. “Tourism has borne the brunt of service delivery challenges therefore lobbying should be extended into the related sectors that seems to have been favoured by the budget speech” Mkhize said.�

Thulasizwe Ngubane of Ngubane Travel responded by saying: “As small businesses we contribute a lot to the much needed jobs amongst the youth. This VAT increase also affects our clients which are tourists. It doesn’t make a significant difference that it’s now 0.5%.”

In the initial address scheduled for February 19, the Budget Speech was postponed. This was due to different political parties in government refusing to support the budget. There are fears from members of society that any amount of VAT increase will lay a heavier burden on the poor, the working class and small business operators. In his speech the Minister made an attempt to respond to calls made that he should consider other options. He said he had considered other options such as corporate tax increases. Minister indicated that he still arrived at a decision that this was the best option.�

Yithabantu Media.