VAT hike: a burden on South Africa's most vulnerable citizens

Political leaders have voiced concerns over the proposed VAT increase, arguing it would exacerbate poverty and inequality in South Africa.

KwaZulu-Natal Finance MEC, Francois Rodgers, said any increase in VAT would compound poverty and inequality and further impact inflation. 

That, he said, ultimately meant that people paid more. 

"The poorest of the poor will take the brunt even if it's 0.5% this year and 0.5% the following year. It's still going to have an impact and an inflationary impact. We have already seen that the Reserve Bank and the governor general are no longer looking at cutting back on interest rates and this all impacts on cash that is available in the economy. Therefore, we believe that taxation is not the way forward. 

"We need to look at the history of how we got into this position of having such limited fiscal resources and one of the reasons is poor policy decision at a national level over the last 15 years, where we have been bailing out state owned entities (SOEs) like Transnet, like Eskom, like SAA, like Denel. 

"Billions and billions of rand have been ploughed into these SOEs and if the government had listened to us in those days, and looked at off-loading and unbundling some of these SOEs, we wouldn't be in this situation. 

"So we have got to stop spending money in areas that are going to impact the economy and that is one of the particular areas that is being impacted, the poorest of the poor." 

He said the reprioritisation of budgets was the way of alleviating the R60 billion deficit at a national treasury level. 

"The province of KwaZulu-Natal can speak with experience. We have had R60 billion cut off our equitable share for the past four years and we have had to take every single department and reduce their baseline by that reduction in the equitable share. 

"We have still managed to keep the province going and this is something that should be happening at a national level. It shouldn't just be provinces that are paying for the sins of our fathers in what has been poor policy direction and the bail-outs of SOEs.

"Cutting back on wasteful expenditure is another area that needs to be addressed. There is a lot more that can be reduced and the national minister of finance and the national treasury needs to take a serious look. 

"We've done exactly that in KZN where we have got cost-containment instructions, which departments now have to follow, to ensure that every single rand and cent that we can save, we can redirect into building a sustainable economy, creating jobs and ultimately dealing with poverty and inequality. 

"Ultimately, I think the VAT increase is just a weak option for government, not taking into account the consequences it will have on the ordinary man in the street; the man in the street who is struggling to pay his rent or his bond, or his motor car, who is struggling to pay his school fees, who is struggling to afford transport costs, and struggling to feed his family. That is the reality. That increase will have a detrimental effect on the average South African." 

Minority Front leader, Shameen Thakur-Rajbansi, said in her home, her elderly mother was up in arms about the high pricing of basic foods.

“This is the general talk in Chatsworth, Phoenix and other townships as people are pushed to pay rising utility and food bills. These competing bills means you have a choice to be thrifty on what you can control. Therefore, people now compare food prices and stay without most foods, which are deemed ‘can do with-outs’,” she said.

“This situation has been brought about by the increase in VAT where only political parties decided this without public consultation. The politicians should have done the right thing and reduced their salaries and perks as well as that of the ministerial civil servants. This would have avoided the unintended consequences the VAT hike is having on consumer spending on essential food items,"  said Thakur Rajbansi.

MK Party MP, Visvin Reddy, said they rejected any proposal to increase VAT.

“Such a move is not only economically reckless, it is morally bankrupt. How can a government that claims to care for the people even entertain the idea of increasing VAT, when the majority of South Africans are living hand to mouth? When unemployment is soaring, poverty is deepening, and food prices are skyrocketing, raising VAT is not a solution. It is a betrayal,” asked Reddy.

“Let us be clear: there are other ways to find the R60 billion needed to balance the budget. Our members in Parliament have already spoken: cut government waste, scrap luxury perks for ministers and senior officials, reduce the bloated cabinet - the largest in the world and recover the billions lost to corruption and fruitless expenditure,” he said.

“Why should a single mother, a pensioner, or a struggling young worker pay more for food, transport, and electricity, while ministers live in mansions and fly business class on taxpayer money?” asked Reddy.

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