VAT hike could drown Sassa grant increase: NPO raises concern

Finance minister Enoch Godongwana's budget speech on Wednesday has elicited mixed reactions, as the proposed VAT increase sparked concern despite increases in social grants.

Godongwana announced VAT will rise by half a percentage point for two years, from 15% to 16%, after opposition to the initially proposed two percentage point hike.

This increase will lead to higher costs for basic foods and goods, severely affecting low-income households.

To cushion the poor from the rising cost of living, the government has allocated an additional R8.2bn to social grants over the next three years.

The old age, war veterans, disability and care dependency grants will increase by R130 to R2,315 per month, while the foster care grant will rise by R70 to R1,250 per month. The child support grant and the grant-in-aid will see a R30 increase to R560 per month.

Godongwana extended the Social Relief of Distress (SRD) grant by another year, allocating R35.2bn to continue the R370 grant payments until March 2026.

However, human rights organisation Black Sash has questioned whether these increases are sufficient to offset the VAT hike.

“While we note the increases of grants above the inflation rate, it is important to highlight the child support grant continues to be below the food poverty line of R796 and the value of the SRD grant has not been increased, with a limited budget allocation which does not speak to the reality of the unemployment crisis in South Africa,” the organisation said.

“This is deeply concerning as it means recipients of these grants are still unable to meet their most basic nutritional needs, worsening food insecurity and poverty.”

The VAT increase signals a troubling backtrack on the government’s social contract with its people, particularly given the already high cost of living, it said.

“We believe the minister has run out of ideas on how to generate the necessary revenue for national development and resorting to a VAT hike is a short-sighted solution that will only worsen inequality and hardship for millions of South Africans.”

The Black Sash urged the government to explore alternative tax reforms targeting wealthier individuals and corporations.

“We do not support any form of VAT increase as it places an unfair burden on those who are already struggling to make ends meet.

“We call on Godongwana to reconsider this regressive tax increase and to commit to a more equitable and inclusive approach to revenue generation, which includes effective job creation initiatives, providing sustainable livelihoods for millions of South Africans/those living in South Africa.”

Some political parties have also rejected the budget, while trade union federation Cosatu welcomed the social grants increases but expressed concern about the SRD grant not being increased.

“We are deeply dismayed that government failed to provide similar inflationary protection for the 8-million SRD grant recipients, who again will be denied any increase. This is an abomination.”

TimesLIVE