S.Africa hikes sales tax in 'tough' post-Zuma budget


S.Africa hikes sales tax in 'tough' post-Zuma budget

Finance Minister Malusi Gigaba warned in his speech to parliament in Cape Town that "this is a tough but hopeful budget" as he announced Value Added Tax (VAT) on sales would rise by 1 percentage point to 15 percent.

The budget deficit is expected to narrow to 3.5 percent of gross domestic product (GDP) by 2020 from 4.3 percent in the 2017/18 fiscal year, while gross debt is seen narrowing to 56 percent of GDP in the 2020/21 fiscal year from almost 60 percent seen in the October mid-term budget statement.

While the Treasury's plans still leave South Africa staring down the barrel of a large income deficit and a rising debt pile for at least the next three years, Wednesday's market reaction suggests it may have been enough to avert a downgrade of its local currency credit rating by Moody's.

This year's challenge proceeds will be donated to the Cyril Ramaphosa Foundation, which will in-turn distribute funds to deserving charities. Mr. Gigaba said the government believes the economy grew 1% in 2017, up from its previous 0.7% forecast, and will expand 1.5% in 2018, 1.8% in 2019 and 2.1% in 2020.

For one, South Africa has thus far not approached the sea, with the economy it offers, in the same way as it may do for land-based economies.

At 0655 GMT, the rand traded at 11.75 versus the dollar, 0.17 percent weaker from its overnight close in NY.

The first increase in the sales tax since 1993 comes just over a year before national elections and could backfire on the ANC because it will be seen to be hitting its largely poor and middle-class supporters.

Improved sentiment since Ramaphosa took power is expected to help lift economic growth.

The budget's proposals to generate an additional 36 billion rand in tax revenue will be essential to fund free university education for students from low-income families - a policy abruptly announced by Zuma on the eve of his departure from the ANC presidency a year ago.

The President said if there is a cabinet reshuffle, it won't be done at the behest of the opposition.

"The president ultimately has the prerogative over this issue", Gigaba told reporters before his speech.

The EFF called on Ramaphosa to axe Gigaba for the role he allegedly played in enabling the Guptas to have undue control over state-owned enterprises and other organs of state. "We will support him fully". "The population was given a crash course in democracy, legal systems, the economy, state-owned companies and how safeguards failed us".



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