Ramaphosa warned about big VAT increase to fund grants

The Sunday Times reports that South African residents could soon face higher value-added tax (VAT) rates to sustain the R350 social relief of distress (SRD) grants.

This was shortly before a City Press report that the Department of Social Development had returned more than R15 billion worth of SRD grant money to National Treasury after it failed to spend the allocated budget.

South Africa introduced the SRD grant to help mitigate the impact of job losses caused by the Covid-19 pandemic and the various government lockdowns instituted worldwide.

Citing government sources, the Sunday Times report refers to a top-level meeting with National Treasury officials at Spier Wine Farm in Stellenbosch in early September 2023.

The meeting included a presentation to President Cyril Ramaphosa proposing, among others, a 1%–2% VAT increase to generate an additional R24.5 billion to R49.4 billion for the grant.

The meeting came after a warning from Treasury that the government faces intense revenue and spending pressures.

However, this week, City Press reported that the Department of Social Development returned billions budgeted for the grants after implementing a lower income threshold, and because several applicants’ incomes couldn’t be verified.

However, citing government insiders, City Press reported that the department didn’t attempt to contact applicants.

“The department claims that we couldn’t locate applicants through their phones, but there were no initiatives to reach out,” the insiders said.

“How can we expect people from rural areas to receive SMSes when we have so much load shedding?”

According to the insiders, some of the unpaid funds were transferred to other departments:

  • R2.94 billion was transferred to the Department of Public Enterprises to repair and replace Transnet assets damaged by floods in KwaZulu-Natal
  • R755 million was transferred to the Department of Defence for extended deployment as part of Operation Vikela in Mozambique
  • R1.77 billion was transferred to other departments

Article: MyBroadBand

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