Gigaba slams claims that ‘VAT hike will hurt the poor’

Minister Malusi Gigaba says the tough decisions taken were aimed at helping, rather than hurting, poor people.

Finance Minister Malusi Gigaba and his team arriving at Parliament to deliver his 2018 budget speech at the National Assembly, Cape Town. Picture: GCIS

CAPE TOWN - Finance Minister Malusi Gigaba has sharply criticised accusations that the Budget has no regard for the plight of poor people.

Gigaba says the value-added tax (VAT) hike and cuts in government spending were the only way to put the country’s finances back on track and avert a further downgrade, which would trigger far-reaching consequences for the country’s economy and its people, especially the most vulnerable.

Gigaba, who was briefing Parliament’s committees on finance and appropriations, has come under fire for the increase in VAT from 14% to 15%.

But he says the tough decisions taken were aimed at helping, rather than hurting, poor people.

“It’s wrong to say it’s fine for us to be downgraded because the poor already lives in junk.”

Gigaba says any downgrade by Moody's - now hopefully averted - would have triggered the flight of capital, increased the cost of government borrowing, caused job losses and would have stifled any chance of growing the economy.

He says poor people would have suffered the most.

“The only other place where we can borrow money from when the financial markets or the bond markets say that we're such a huge risk or have debt we can't pay is the International Monetary Fund. Believe you me, that is not pro poor.”

Gigaba says poor people will no longer have to choose between buying food or saving for higher education fees, as the government has now taken over that responsibility.

(Edited by Shimoney Regter)