VAT, interest rate to hit consumers hard

THE Finance Ministry's proposed VAT increase and South Africa's Reserve Bank decision to keep a hold on interest rates will affect the economy and households.

- TASCHICA PILLAY [e-mail]

The South African Reserve Bank governor Lesetja Kganyago held interest rates at 7.5%, while the prime lending rate remains at 11%.

Mervyn Abrahams, programme co-ordinator for the Pietermaritzburg Economic Justice and Dignity Group, said it was disappointing that the Finance Minister Enoch Godongwana chose to increase VAT to increase revenue.

"We thought it would be better found elsewhere. VAT impacts every goods sold in South Africa. Life is expensive for all South Africans, as well as small businesses who will pay more on tax. This is bad for the economy and households.

"When VAT was increased in 2018 by 1%, the National Treasury did not collect the amount they projected. We suspect the same will happen again. Consumer behaviour changes as people buy less and then pay less VAT," said Abrahams.

He said the 0.5% increase on a household food basket, basic toiletries and prepaid electricity worked out to be an increase of R20.41.