NewsSouthern AfricaSouth Africa to raise VAT for first time in 25 years to plug budget hole


Posted on Wednesday, 21 February 2018 15:28

South Africa to raise VAT for first time in 25 years to plug budget hole

By Reuters

South Africa's new President, Cyril Ramaphosa, center, arrives at parliament in Cape Town, South Africa, Friday, Feb. 16, 2018. Photo:Nasief Manie/AP/SIPASouth Africa will increase value added tax (VAT) for the first time in over two decades, the Treasury said on Wednesday, as new President Cyril Ramaphosa's government aims to cut the budget deficit and stabilise debt after years of slow economic growth.

Unchanged since 1993, VAT would increase to 15% from 14% effective April 1, the Treasury said in a document laying out its budget plans for the next three years.

Ramaphosa took over as leader of South Africa last week after Jacob Zuma stepped down on orders of the ruling African National Congress, bringing to an end nine years of corruption scandals and economic mismanagement.

Tough but hopeful

Zuma has denied all wrongdoing.

The rand extended gains to 0.81% against the dollar, government bonds firmed, while retail shares on the stock exchange fell as Finance Minister Malusi Gigaba read his budget speech.

A VAT hike ran the risk of adding a heavy financial burden on the poor ahead of elections next year, but Gigaba said poor households would be cushioned through a zero-rating of basic food items such as maize meal and beans.

"This is a tough, but hopeful budget," Gigaba said. "We decided that increasing VAT was unavoidable if we are to maintain the integrity of our public finances."

The Treasury said the budget deficit is seen narrowing to 3.5%  of gross domestic product (GDP) by 2020 from 4.3% in the 2017/18 fiscal year.


Subscriptions Digital EditionSubscriptions PrintEdition










Music & Film



Keep up to date with the latest from our network :


Connect with us