Minister of Finance Malusi Gigaba has defended National Treasury’s decision to implement an increase in value-added tax (VAT), a decision, Gigaba said, was long overdue and unavoidable.
This decision to increase VAT by one per cent from 14 to 15 per cent was announced on Wednesday when Gigaba unveiled a R1.67 trillion budget in his maiden Budget speech.
The minister defended the decision on Thursday morning in a post-Budget briefing in Cape Town in which he unpacked the budget and its projections. According to Gigaba, South Africa had run out of options.
The decision to implement free higher education for the poor and working class, said Gigaba, was to avoid more student protests.
To account for the estimated R57 billion needed to phase in the free education, Treasury will now need to reduce spending and hold back on a number of its capital projects.
Gigaba said that students must make an effort to pass as the money going toward the education will be coming from taxpayers.
"We need to be very blunt because this is a lot of money. The people of South Africa are going to pay to educate our children. Like I say with my own children, that I'm spending a lot of money sending you to school, I want you to pass, I'm not giving you the option to fail," Gigaba said at the briefing.”
On Wednesday unions expressed their anger over the decision to up VAT saying it would punish the poor.
The secretary-general of the South African Federation of Trade Unions (SAFTU), Zwelenzima Vavi, said the poor and workers are being punished for years of mismanagement that took place under and by former President Jacob Zuma.
“The VAT increase… is such a double insult to workers, who are now being asked to clear the mess created by the very person who is reading the Budget.”
Cosatu’s Matthew Parks expressed similar sentiments saying that politicians and their friends looted the country and workers were now suffering as a result.
To try cushion the VAT increase Gigaba also announced a small but higher than inflation increase to social grants.