'The poor do not live on bread and pap alone' - SACP

The SA Communist Party has decried the increase in value-added tax (VAT) announced by Finance Minister Malusi Gigaba on Wednesday.

Gigaba said in his budget speech that VAT would rise by one percentage point to 15%. He said the impact on the poor would be minimised given the zero-rating of basic food items like maize meal‚ brown bread‚ dried beans and rice. The same applied to an above-average increase in social grants‚ as well as an increase in the bottom three personal income tax brackets.

The SACP said Gigaba had fared well given the circumstances but disagreed with his assessment around VAT.

"While some basic foodstuffs are zero rated‚ the working class and poor do not live on bread and pap alone. Children of the poor don’t go to school dressed in staple foods. It is simply untrue to argue‚ as the Minister of Finance did‚ that the 20% poorest will be unaffected by the VAT hike. What is more‚ other indirect taxes‚ like the increase in the fuel levy‚ will further impact on the cost of living‚ especially for the poor‚" the party said in a statement.

"Overall‚ the macro-economic impact of the VAT increase will dampen demand‚ impact on GDP growth‚ and have negative implications for employment creation."

The SACP acknowledged that the budget reflected a "very challenging situation"‚ including a massive fiscal deficit. It welcomed the attention paid to anti-corruption measures‚ such as tackling governance at state-owned entities. However‚ the party was not convinced that the poor would benefit.

"We note the higher than inflation increases in social grants which were announced as a compensatory measure. Apart from the extremely modest impact these increases will actually have‚ there is a deeper‚ longer-term structural concern‚" the ANC alliance partner said.

"In essence‚ the budget is reaching for a social compact with the poor – increased social grant payments in exchange for increased VAT. This runs counter to the underlying logic of President Ramaphosa’s Sona address in which stimulating the productive economy – whether through industrialisation‚ infrastructure development‚ land reform or leveraging investment into job creating activity – is the critical point of emphasis.

"The implicit logic of the social grant for VAT deal is the perpetuation of a welfarist and not active developmental approach."