Ramaphosa Pivots on Budget as South Africa Scraps Tax Hikes

South Africa signaled a shift in budgetary policy, backtracking on planned tax increases as it switched focus to reigniting the coronavirus-battered economy by bolstering consumption and investment.

Finance Minister Tito Mboweni reversed a decision to raise an extra 40 billion rand ($2.8 billion) over the next four years, allocated funds for Covid-19 vaccines and set more ambitious debt-consolidation targets, while sticking to a pledge to freeze state workers’ wages. He also announced inflation-beating relief for individuals, whose taxes have been raised in five of the past six years, and a 1 percentage point cut in corporate tax from April 2022.

“We agree that tax increases must be kept to a minimum as we stabilize our public finances,” Mboweni said in his budget speech to lawmakers in Cape Town on Wednesday. “We will not rest until we have fundamentally altered the structure of this economy.”