Many South African families can relate to the image of the rich uncle from the early 1990s—the one who seemed to have it all. This was the uncle who cruised around in a shiny BMW E36 3 Series, the “Dolphin,” the one with the sharp, tailored Brentwood pants and crisp mercerised cotton golfers. He was the epitome of success, proudly sending his three kids to the best Model C schools in the suburbs. They lived the high life, and it seemed as if nothing could touch them. The rich auntie who accompanied him shared the same vibe—too sophisticated for mundane tasks like chopping onions or carrots and always insisting on catering services for family gatherings.
But somewhere along the line, something changed. The uncle’s wealth, once abundant and confidently flaunted, began to dwindle. Assets that once seemed secure started disappearing, and before long, he was forced to return to the family home, the place that once symbolized everything he had worked hard to escape. South Africa, in many ways, is living through a similar crisis today, mirroring the downfall of that once-proud rich uncle.
As a country, South Africa finds itself in a precarious position. Like the uncle of the 1990s, South Africa has lived with the illusion of prosperity. The country has boasted policies like former President Thabo Mbeki’s Growth, Employment, and Redistribution (GEAR) program and the Reconstruction and Development Programme (RDP), which were designed to bring prosperity but never fully delivered on their promises. The lack of substantial economic growth over the years has taken its toll, and the country now faces a mountain of challenges—massive debt, soaring unemployment, and a stagnant economy.
The Covid-19 pandemic only worsened matters, leaving South Africa struggling to recover and financially limping from one crisis to the next. With a tax base of around seven million people and over 25 million social welfare grant recipients, the country faces an increasingly dire situation. The resources needed to fund schools, hospitals, infrastructure, and essential services far exceed what the Treasury can provide.
In response, Finance Minister Enoch Godongwana proposed a controversial increase in VAT by two percentage points. The proposed hike, which would have generated R60 billion, was seen as a possible lifeline for funding essential services like public servants’ salaries, school teachers, and early childhood development programs, as well as investing in infrastructure such as rail projects. However, the public backlash was swift, and opposition from government ministers, including those from the DA, made it clear that such a move would be politically toxic.
The Treasury explained that despite the unpopularity of a VAT increase, it was the most practical solution available. Previous increases in personal and corporate income taxes had been ineffective in raising the expected revenue, as taxpayers often found ways to circumvent the system. Personal income tax, in particular, had a negative impact on employment, savings, and growth, making a VAT increase a less disruptive choice for generating funds.
South Africa’s situation is critical, and the reality is that the VAT hike is unlikely to happen. The Treasury’s proposal merely highlights the immediate needs of the country, including the salaries of teachers, doctors, nurses, and other frontline workers who provide essential services to the nation. The challenge, however, lies in how to finance these needs without resorting to more politically damaging measures, such as reducing the size of the Cabinet or selling off state-owned enterprises.
Perhaps one solution lies in tackling the root cause of South Africa’s financial troubles: corruption. The country’s rampant theft and mismanagement of resources have drained the public coffers. If the government could institute a moratorium on corruption for just one year, the amount of money that could be saved would go a long way toward addressing some of the immediate financial shortfalls. While such a solution may sound simplistic, it is perhaps the most effective way to start reversing the country’s downward spiral.
Beyond corruption, the conversation around South Africa’s fiscal health must also include reforms in areas like correctional services, where some believe prisoners could be employed in productive work such as agriculture or textiles to reduce the burden on taxpayers. While these suggestions may seem outside the box, they reflect the growing need for innovative solutions to solve the country’s financial problems.
At the end of the day, South Africa is facing a difficult reality. The country, like that rich uncle from the 1990s, is in a situation where the bills are mounting, and it’s becoming harder to keep up with the demands. Unemployment is rampant, young people are still struggling to find work, and the national debt is growing. The country needs sustainable economic growth to generate jobs and ensure that the social safety net is there for those who need it most. Without change, the outlook is bleak.
South Africa cannot afford to become the rich uncle who lost it all. We need urgent action to revive the economy, reduce corruption, and ensure that the country is set on a path of sustainable growth. As Mbeki often asks, “What is to be done?” The answer lies in bold, transformative policies that focus on long-term stability, economic inclusivity, and building a nation that can truly prosper without flattered appearances. The time for change is now, or we risk falling deeper into crisis.
