BY MBONGENI NDLELA
MBABANE – Government has responded positively to South Africa’s newly proposed Value-Added Tax (VAT) adjustment, expressing relief that the increase is lower than initially anticipated.
Minister of Finance, Neal Rijkenberg, confirmed that Eswatini will consider aligning its VAT structure with that of its southern neighbor in a manner that minimizes economic strain on citizens and businesses.
Rijkenberg announced that his ministry will take the proposed VAT increase to Cabinet for discussion.
“If approved, government will subsequently seek parliamentary approval to implement a similar increase,” he said.
The proposal follows South African Finance Minister Enoch Godongwana’s decision to raise VAT by 0.5 percentage points in 2025/26 and an additional 0.5 percentage points in 2026/27. This measured approach marks a shift from earlier discussions of a potential 2% hike, which would have placed a heavier burden on household expenses.
Godongwana’s reworked 2025 Budget Speech, delivered on Wednesday, emphasized tough but necessary fiscal measures to stabilize South Africa’s economy. While acknowledging opposition from some political parties, including the Democratic Alliance (DA), he highlighted the need for additional revenue streams to support infrastructure, social programs, and debt management.
The proposed VAT adjustments, although controversial, were positioned as part of a broader strategy to ensure long-term economic sustainability.
Maintaining fiscal stability
Eswatini has historically aligned its VAT rates with South Africa to ensure regional consistency and ease of trade. Given that Eswatini’s economy is closely tied to its larger neighbor, any fiscal policy adjustments in South Africa often influence decisions in Eswatini. The Ministry of Finance will assess the potential impact of this VAT increase on local businesses, trade, and household spending before implementing a final decision.
Government also recognizes the importance of sustaining public services and infrastructure investment, which rely on VAT revenues.
Rijkenberg reaffirmed that any adjustments to the VAT rate would be carefully managed to balance economic growth with fiscal responsibility.
Regional collaboration and economic resilience
Beyond VAT alignment, Eswatini remains committed to strengthening economic collaboration with South Africa and other Southern African Customs Union (SACU) member states. By closely monitoring economic trends and aligning key policies, government aims to enhance Eswatini’s attractiveness to investors while maintaining affordability for consumers.
Godongwana’s budget speech also acknowledged the challenges facing South Africa’s economy, including slow growth and a constrained fiscal environment. His government’s decision to propose incremental tax increases rather than a sudden spike reflects a commitment to cushioning the economic impact on households and businesses. This approach resonates with Eswatini’s economic strategy, which prioritizes gradual and measured fiscal adjustments to ensure economic resilience.
Business and public sector engagement
The Ministry of Finance has assured businesses and citizens that it will engage stakeholders before finalizing any VAT adjustments. Government will seek input from key economic players, including industry leaders, small and medium enterprises (SMEs), and consumer groups, to ensure that any fiscal decisions align with national economic goals and do not disproportionately affect vulnerable communities.
As the discussion moves forward, Eswatini’s proactive stance on aligning with regional economic policies underscores its commitment to economic stability, regional cooperation, and sustainable development. While the VAT increase proposal is still under review, the government remains optimistic that a well-managed implementation strategy will yield positive results for the country’s economy and its people.
