Phakamile Hlubi-Majola
The aftershocks regarding the proposed VAT increase, from 15% to 17%, continue to resonate across South African society. Finance Minister and ANC NEC member, Enoch Godongwana is the most unpopular person right now for attempting to propose a 2% VAT increase, which caused a postponement in the Budget Speech because members of the Government of National Unity rejected the proposal.
A VAT increase will only hurt the poor and the working class. It is disappointing, but not surprising that the ANC would make such a suggestion, particularly at this time, when the working class is struggling to make ends meet, and the high cost of living is causing so much misery for workers and their families. National Treasury is showing how far removed they are from the realities facing ordinary people.
This incident calls to mind the riots that occurred in Kenya in June last year, which were triggered by the government's controversial Finance Bill, which proposed major tax increases on basic foodstuff. Kenyans took to the streets last year as part of the #RejectFinanceBill2024 movement to reject the backward taxation regime that the state wanted to impose on its citizens.
This included an increase in imports of phones, computers and bikes. As well as an initial proposal to increase levies on sanitary towels, diapers, bread, vegetable oil and sugar. It also proposed to double the VAT on the price of fuel from 8% to 16%.
Kenya has a debt of 80 billion dollars which is about roughly 75 percent of its GDP. It owes a host of foreign banks and imperialist institutions like the World Bank and the International Monetary Fund. The government had a budget shortfall of an estimated 200 billion Kenyan shillings and the state proposed increasing taxes as well as austerity measures to fill the gap.
Like the South African government, the Kenyan government did not consider how this proposal would affect ordinary people.
Young people in Kenya were so angered by the Bill that they responded with rolling protests in the capital city. Hundreds of thousands of them marched to parliament, and they succeeded in breaching security, ransacked it and set it on fire. Lawmakers had to escape into underground tunnels.
The Communist Party Marxist (CPM) in Kenya played a significant role in the mass mobilization efforts, and to date, its leaders and party members are victims of repressive acts like the attempted assassination of the General Secretary, Booker Omole and, the arrest of party chairman, Mwaivu Kaluka and other party members. These attacks happened against a backdrop of, what seems to be state-sponsored abductions of government critics.
At least 30 people have died and 82 people have been kidnapped including journalists and activists since June 2024, according to the Kenya National Commission on Human Rights. The commission issued a press statement on the 30th of December that condemns the violent actions of the police in response to peaceful demonstrations against the abductions. The state is acting with brutality because it needs to defend the interests of capital, and it has turned a deaf ear to the suffering of the masses.
The ANC-led government is on a similar slippery slope by proposing a budget that disregards the high cost of living. No matter how they try to spin it, a VAT increase will deepen the misery of the working class. They are tone-deaf and this, unfortunately, will be their undoing.
The latest Household Affordability Index report compiled by the Pietermaritzburg Economic Justice and Dignity Group found that low-income earners can barely afford food. The neo-liberal economic framework continues to crush the working class.
The average cost of a household basket of food is currently at R5433,70 and it has increased by 2% from last year. The National Minimum Wage is R27 per hour and on this meagre wage, the working class somehow has to feed an average of four members of their family.
To make matters worse, they spend 57% of their monthly income on transport and electricity costs. Bear in mind that the state-owned power utility, Eskom is due to implement a 12.7% tariff increase on the 1st of April this year. The state sought to impose a 2% VAT increase which would make survival almost impossible.
More direct examples of the extent of the suffering imposed by neo-liberalism abound. Consider a well-reported case that occurred in August of 2023 in Butterworth in the Eastern Cape, where, a woman killed herself and her three children by eating rat poison, allegedly because she was so heavily indebted, that she could not afford to buy food to feed her two children who were eight and five years old.
Suicide is a common mechanism employed by people in desperate situations. In India for example, at least four hundred thousand farmers have ended their own lives in response to financial pressures between 1995 and 2018. It has been reported that their deaths are directly linked to privatization policies in agriculture, which made farming an unsustainable livelihood, and left many farmers with crippling debt.
The Finance minister claims that the only option they have to fund public sector increases for civil servants; expand access to early childhood development opportunities for children; retain teachers, and front-line workers, as well as fund the revitalization of the rail system and increase social grants, is to increase VAT. They claim this is the only reasonable option that would generate ‘substantially more revenue’
However, what is revealing about the proposal is their refusal to increase corporate taxes which are currently at 27%. They claim that such a move would “discourage investment and job creation, ultimately yielding less revenue in the long run.”
This is hogwash. The ANC-led government refuses to increase taxes even marginally for corporations, but wants the working class to sacrifice itself for the so-called ‘greater good’. This is like saying, that workers and their families must set themselves on fire, to make everyone else warm. It is unfair and a demonstration of where the state's priorities lie, and that is not with the people.
It is incumbent on the government to focus attention on the failure of its conservative macroeconomic policies. The rioting that happened in Kenya can easily happen here.
Many South Africans, on a daily basis, face many problems such as crime, poverty, joblessness, and a lack of future prospects. The impact of failing to find credible solutions to these problems is borne by workers and their families.
This latest attempt to impose an unwanted VAT increase continues to pile the pressure on this sector of society. The government is essentially stoking the fire, and the imminent conflagration will make the July riots of 2021 seem like a picnic and will be proof positive that no lessons were learnt then, and certainly none today.
* Phakamile Hlubi-Majola is a Communicator and former Journalist. She is currently the National Spokesperson for the National Union of Metalworkers of South Africa.
** The views expressed do not necessarily reflect the views of IOL or Independent Media.