Eastern Cape business owners, politicians and economic experts have welcomed finance minister Enoch Godongwana’s sudden reversal of his decision to implement a 0.5 percentage point VAT increase from May 1.
East London restaurant owner Lwandy Ngebe said all the entrepreneurs they knew welcomed the decision.
“Businesses would have faced higher operational costs, squeezing from the little margins we already make as it is not easy to just pass on additional costs to our customers.
“With the upcoming rates and electricity hikes, this would have forced businesses to cut staff hours, ironically contributing to high levels of unemployment.”
Border-Kei Chamber of Business CEO Lizelle Maurice expressed relief.
“We are overjoyed because it was going to be an extra half percent above what we are paying, which is impossible to survive on as we are one of the most over-taxed nations.
“Businesses are taking a lot of strain and we cannot afford any increases.”
Dispatch The Wealthsmith columnist and East London financial adviser Scott Roebert, owner of Blueprint Finance Brokers, said the decision was a huge relief for the average consumer. “The knock-on effects ould have been felt all through the economy, even with a hike as small as half a percentage point, further straining households that are already under severe pressure,” he said.
“The news is especially welcome after the Consumer Price Index came out at only 2.7%. Compared to the 5.5% government wage increase, this leaves consumers with only a 2.8% positive net effect.
“If you received a 5.5% increase and buying power declines by 2.7%, your buying power strengthens by only 2.8%,” he explained.
“When the CPI is high and salary increases are not, as has been the case for the past few years, this translates to almost no extra food on the table.”
In cases where the hike had already been applied, for example with debit orders, Roebert said financial institutions usually apply a credit to balance it out in the following month.
Grant Sinclair, MD of enterprise resource planning, accounting and payroll software company Treadstone Consulting and chair of the Border-Kei Chamber of Business small business committee, welcomed the scrapping of the increase, but said the reversal brought its own headaches for some.
“One of my biggest concerns when I heard that the government had reversed its decision was for our IT customers who had planned to change all their labels on the goods on their shelves before the weekend, printing new prices with the VAT increase applied, who are now having to reverse the whole process.”
Fortunately, many of his clients had decided to wait for the weekend before changing their prices.
“Some of the big stores that made changes early will have to remove adjusted prices and start again manually.”
The manager of one of East London’s largest retailers, who asked not to be named, said the proposed increase had already meant added overtime costs for staff who had worked to get stores ready for trading with the extra VAT applied, and now had to redo everything.
DA MPL Yusuf Cassim said: “We stood firmly against the VAT increase. “We believe the minister has come to the right conclusion after the DA’s court action.”
Cassim said the cost of living needed to be reined in rather than increased.
ANC MP Mdumiseni Ntuli said: “Together, and considering the views of South Africans across the party-political divide, the parties had extensively engaged with the minister of finance on the proposed VAT increase, leading to today’s announcement.
“The ANC looks forward to building on this multiparty co-operative spirit.”
EFF provincial spokesperson Liza Mfana said they did not see this as a victory for the people of the Eastern Cape and called for the finance minister to step down.
“This is just the latest in a string of misguided and unscientific financial decisions by this minister, grounded on a neoliberal fiscal approach which does not put the needs of our people at the centre.
“It is a budget that doesn’t tell us anything about how the collapsing healthcare of our province will be saved or how law enforcement will be empowered to combat crime.
“This is a budget that says nothing about creating jobs for the millions of jobless people in our province.”
ActionSA Eastern Cape leader Athol Trollip said his party had been “pilloried and vilified by all and sundry, told that we were naive, duped and were stupid”.
“This [decision] is a vindication of pragmatic and constructive opposition.
“ActionSA used the honey strategy and those who used the vinegar strategy are now claiming victory,” he said.
Freedom Front Plus BCM councillor Debbie Theron said the decision was a victory for ordinary South Africans.
“A VAT increase of one percentage point over two years would have been a severe blow in the current economic climate, with high levels of unemployment affecting millions of people struggling to put food on the table.”
The Komani Progress Action (KPA) said the decision showed how the government had little regard for its people.
KPA secretary-general Axolile Masiza said: “This reversal may be necessary, but it is a revealing indicator of how political elites in government play with the lives and livelihoods of ordinary people.
“It is clear that the initial proposal to increase VAT was taken without engaging those who would bear the brunt of such a policy: the working class, the unemployed and already pushed to the margins.”
Daily Dispatch
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