Strong indication Gigaba will announce increase in VAT

Finance Minister Malusi Gigaba’s expected to explain how he intends raising the billions needed to plug the hole in his Budget and to fund free higher education and training.

Malusi Gigaba at a briefing. Picture: AFP

CAPE TOWN - All eyes are on Finance Minister Malusi Gigaba as he’s set to deliver his maiden Budget speech at Parliament at 2 pm on Wednesday afternoon.

Gigaba’s expected to explain how he intends raising the billions needed to plug the hole in his budget and to fund free higher education and training.

While he’s expected to announce cuts to state spending, South Africans are bracing themselves for the possibility of tax hikes.

There are strong indications that Gigaba will announce that value-added tax (VAT) will be going up from 14% by one or 2%.

If he does, this will be the first VAT hike in the democratic era.

Gigaba has to raise billions to cover a massive revenue shortfall that in the October medium-term budget policy statement was expected to come in at R50,08 billion.

He also has to find funds for the fee-free higher education and training that former President Jacob Zuma committed the government to in a surprise announcement in December.

Analysts have warned that with high unemployment and low growth, personal income tax has been raised as far as it can go, for now, making a VAT hike all the more likely.

Meanwhile, economist Azar Jammine says it does not matter who presents the budget.

There had been much speculation around whether Gigaba would still be finance minister after President Cyril Ramaphosa took over from Zuma.

Jammine says the Budget speech is usually prepared by Treasury, not the minister of finance.

“I think the budgetary process has been in place for over a year, driven by National Treasury and we’ve had two different ministers of finance overseeing that process. and in addition, we now have a new president who appears to have already met with National Treasury on a number of occasions.”