The proposed 1% increase in VAT, announced in the National Budget during March, came in for criticism from a panel of experts at a recent ORT Jet function.
The insightful comments from members of the panel, chaired by local auctioneer Ariella Kuper, provided the audience with more in-depth understanding of the limitations in the proposed Budget. (At the time of writing, the proposed National Budget had not yet been ratified owing to disputes among various political parties.)
Here we share some of the insights:
• A 1% increase in VAT will dampen the environment for small business. Businesses will incur greater expenses if VAT goes up, and that means that they will stop employing more people, which will negatively impact unemployment.
• Increasing VAT reflects a lazy approach by Government. What is needed is some hard work on the expenditure side of the operations of Government. But we are not doing well in this regard. For instance, it’s been calculated that the country can afford no more than a 3,5% increase in salaries for state employees, yet Government has agreed to a 5,5% increase, and Transnet is demanding a 10% increase.
• The Minister of Finance spoke about a growth projection for the next three years of 1,8%. Based on our growth figures in recent years, this is unlikely to be achieved. In fact, the growth in South Africa’s economy for 2024 – a mere 0,6% – was particularly disappointing, considering that there was less load-shedding than in previous years.
• The Budget makes no adjustment to personal income taxes. Some people may think that this is positive because there was no increase but, in fact, consumers will be hit hard because of the effects of inflation. Taking account of inflation would have meant that personal income taxes should have been reduced.
• The country must embark on structural reform, in particular in allowing the private sector to become involved in key problem areas like energy and water supply. A move like this would be good for Foreign Direct Investment, which the country sorely needs.
• South Africa’s transport sector is performing poorly. Because our ports are not operating efficiently, we are using ports in Namibia and Mozambique, and this comes at a greater cost to local businesses.
• In foreign affairs, South Africa should remain politically neutral. Our Government has taken sides on big international issues, which creates uncertainty and a lack of credibility among foreign investors.
While disagreements over the proposed Budget may be putting the Government of National Unity at risk, it is certainly good to see that there is discourse happening regarding some key issues. ●
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