Cape Town – There has been no announcement of any intention to increase the number of food items that are zero-rated for VAT, says Finance Minister Enoch Godongwana.
“The current basket of food items that are zero-rated are well targeted towards poor households,” Godongwana said.
He was responding to DA MP Dion George, who asked whether there were details of steps that the National Treasury had taken to relieve the burden on poor households due to the rapidly rising cost of living.
Godongwana also said the then minister of finance had in 2018 appointed a panel to consider and review the list of zero-rated food items when VAT increased.
Through that exercise, white bread wheat flour and cake wheat flour were added to make the current list of 21 food items.
“The analysis of the independent panel indicated that extending zero-rate items would be inefficient since high-income earners tended to benefit more from such measures,” Godongwana said.
George said his party has a plan to tackle hunger and bring relief by re-allocating the R50million food aid to Cuba, among other things.
George also said the proposal did not need to wait for the budget in February, and asked if Godongwana would give a commitment that he would act immediately to make the food items more affordable to South Africans.
In his response, Godongwana said one of the things he has not done in his life, even as a trade unionist, was to promise things that he could not deliver.
“What I am not going to do is to mislead this house and say tomorrow I will do zero rating of X items,” he said.
Godongwana also said the panel of experts did an assessment and came to the conclusion it would not make economic sense, in particular for vulnerable communities, to add most of the items named by George.
However, he said he normally trusted expert advice.
“If the proposal is: am I prepared to subject the items to an expert analysis, the answer will be yes,” Godongwana said.
He told the MPs that the government has taken steps to provide relief to help households that experienced high food and fuel prices.
“The government is keenly aware that households are under great pressure from high, increasing inflation eroding their income,” he said, adding that the burden of high cost of living fell more on low-cost households because they spend a relatively large proportion of their income on basic necessities, such as food and public transport.
“The main increases in prices are global, and international factors beyond South Africa’s control. This includes demand and supply mismatch, because of the rescinding threat of Covid-19 and events such as the Russian-Ukraine conflict, which has driven the price of oil to almost historic highs,” Godongwana said.
The government made specific announcements in the last budget in February, like the extension of Social Relief of Distress Grant for another year, and that was followed by further announcements, he said, adding that interventions the government has undertaken could not resolve the impact of inflation.
The SA Reserve Bank was responsible for monetary policy and will lead by taking steps with regard to Repo rate, he said.