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Duma Gqubule weighs in on canned VAT increase

Duma Gqubule weighs in on canned VAT increase

eNCA24-04-2025

JOHANNESBURG - South Africans won't be paying more for VAT as previously proposed.
That's because Finance Minister Enoch Godongwana has backtracked on the tax increase.
The decision follows consultations and recommendations from Parliamentary committees.
Godongwana will now table a Rates Bill to ensure that VAT remains at 15%.
According to economist Duma Gqubule, the basic goal of budget fiscal and monetary policy is to stimulate economic growth and employment creation.

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State's interdepartmental strategy to tackle hunger hampers South Africans' right to food — report
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State's interdepartmental strategy to tackle hunger hampers South Africans' right to food — report

South Africans cannot hold a specific individual or department to account for the right to food not being realised because most of the national frameworks on food security are interdepartmental, says the author of the report released by the Socio-Economic Rights Institute. The report calls for the drafting of national framework legislation in relation to the right to food in the country. The government of national unity (GNU) in South Africa has highlighted food security as part of its broader social and economic policies. According to its Statement of Intent, the GNU aims to tackle poverty, spatial inequalities and food security by providing a social safety net and improving access to basic services. South Africa's National Policy on Food and Nutrition Security outlines strategies to ensure food availability, accessibility, utilisation and stability. The government has committed to promoting the right to adequate food, addressing hunger and improving food security through coordinated efforts across various departments. Despite South Africa being food secure at a national level, household food security remains a challenge, with increasing food insecurity rates in recent years. The GNU's approach includes social support initiatives such as household grants and school feeding schemes to mitigate these issues. In a report released by the Socio-Economic Rights Institute (Seri) on Tuesday researchers recommended legislative and policy shifts that will help South Africans to have better access to food and potentially eradicate hunger. This is part of multiple recommendations that address other socioeconomic factors that create food poverty. 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It also recommends that the updated National Food and Nutrition Security Plan be amended to address and monitor affordability and food pricing and enable people's economic access to nutritious food (the ability to purchase food as opposed to direct access, which refers to growing one's own food). The report, titled ' Food for Thought: Reflections on Food (In)Security. Laws, Experiences, Interventions ', aims to better understand how some of Seri's partners and client groups have been affected by, and responded to, food insecurity and hunger issues. Seri's research focused on the experiences of the leadership and of members as conveyed by leaders of the following partners: the Inner City Federation, the South African Informal Traders Forum, the African Reclaimers Organisation, the Commercial, Stevedoring, Agriculture and Allied Workers Union, the Izwi Domestic Workers Alliance and the Slovo Park Community Development Forum. Other recommendations call for an awareness of vulnerability of certain groups in society when creating, amending and updating policies that foster food security: 'Acknowledge food system workers, for example farm workers and informal traders, and ensure and monitor that they have fair and safe working conditions, and receive living wages. Acknowledge how women might be differently affected throughout the food system, for example as producers, workers and consumers, and incorporate specific interventions to attain greater gender equality. This could take the form of monitoring and increasing the number of women who have access to land for productive purposes, addressing unsafe working conditions due to pesticide use on farms and low wages/seasonal work of female farm workers.' The report further explains that sufficient funds have to be in place to implement these processes, which often need human and other resources to come to fruition. 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I believe in reforms, but the current system must be replaced by a people-driven system… that caters for farmworkers and farm dwellers as well as for South Africa and the world.' Swart was a panellist at the launch of the report in Johannesburg on Tuesday and the union was involved in the data collection and providing experiences for the report. Swart echoed the sentiment that people need money to access food. 'The farms are lobbying the government to change the minimum wage and change the sectorial determination for farm and domestic workers. They want to hire and fire,' he said. 'They don't understand their actions on human behaviour. Children drop out from school in large numbers. Teenage pregnancies and sexual abuse are on the rise… violence and murder are also on the rise. All these things emanate in a country where hunger and starvation is on the order of the day.' DM

UAT proposes solutions to reduce high youth unemployment
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UAT proposes solutions to reduce high youth unemployment

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The strategic reforms that could transform South Africa's economy
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The key is to break the strangleholds that Eskom and Transnet have on our electricity, ports and railways. Introducing real competition into electricity generation and the operation of ports and railways is the key to unlocking real growth in South Africa's stagnant economy. So said Deputy Finance Minister Ashor Sarupen at a seminar organised by the In Transformation Initiative last week, where Jakkie Cilliers, head of the African Futures unit at the Institute for Security Studies (ISS), presented the unit's latest report, co-written with Alize le Roux, which forecasts SA's growth trajectory to 2043. The seminar pondered why, despite the creation of a government of national unity (GNU) last June and the virtual end of load shedding, the South African economy only grew by a miserly 0.1% in the first quarter of 2025. Cilliers said South Africa was caught in a 'classic upper middle income growth trap'. 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The question, he said, was why South Africa did so poorly on social capital, education and health, given the very high levels of expenditure on those services. 'And the only answer that you can come up with is government inefficiency, the poor use of existing funds. And the question is, how do we escape the middle-income trap?' Cilliers asked. He said the African Futures team had modelled the effects of reforms in eight different sectors on South Africa's economic development. These were demographics and health; agriculture; education; manufacturing; infrastructure and 'leapfrogging' (i.e. bypassing older technologies); free trade; financial flows; and governance. They found that the largest return was from increased manufacturing, followed by freer trade and then better governance. So, for instance, all eight sectors combined would increase GDP per capita in 2043 by about 33%, from the $ 14,750 on the current path to $19,650. Of this, increased manufacturing would contribute about $930; freer trade (with the full implementation of the African Continental Free Trade Agreement) would contribute about $900; and better governance about $800. The combined impact of those eight reforms would decrease the percentage of South Africans living below the $6.85 a day poverty rate to 50% by 2043, down from 62% in 2023. This would represent 6.1 million fewer poor people than if the economy remained on its current path, though still leaving South Africa with a large poverty burden, Cilliers said. The African Futures team had compiled a laundry list of recommendations, starting with the need to strengthen governance and accountability through evidence-based policies, curtailing corruption and increasing accountability and inclusivity. Deputy Finance Minister Sarupen, of the DA, said much of Cilliers' analysis resonated with assessments by the Treasury's own economic policy team and the work being done by the government's Operation Vulindlela and by various parties in the GNU. He agreed that merely 60% growth in the size of the economy over the next two decades 'will not get us out of the trap that we're in' and that South Africa was in danger of falling from upper middle to lower middle income status. Structural constraints The low growth was driven by structural constraints, weak productivity, low investment in capital, higher inequality and an underperforming formal labour market. The Treasury was 'acutely aware of this'. But he said the government had to prioritise its reforms to tackle the problem because of the many competing demands of a massive amount of social ills and a very strong active civil society. He noted that South Africa had a system of fairly autonomous government ministries that made it harder to pursue coherent policies. Cilliers had identified manufacturing and freer trade as South Africa's best paths forward. Sarupen noted that cheap reliable energy with stability of pricing and supply underpinned manufacturing and industrialisation . 'And one of the drivers of our de-industrialisation has been excessive pricing and inefficiency of supply that really hurts manufacturing in South Africa,' he said. He noted that while prices in the rest of the economy had risen 196% since 2009, Eskom's prices had increased by 403%. So Eskom was driving inflation and deterring investment. Sarupen added that part of the reason GDP growth had been so low over the past year, despite an end to load shedding, was because companies had sunk so much money into load-shedding-proof themselves over the past few years that they had not spent enough on actual business expansion and employment. Sarupen also noted that free trade — another key reform advocated by Cilliers — 'requires you to be able to actually move goods and services cheaply and easily around, so the logistics reforms need a lot of depth and need to maximise competition. 'And so in the reform process that we're undergoing we need to be careful to not just bring the private sector into Transnet's monopoly structure. But rather how do we create competition, across multiple ports for example.' Likewise, South Africa had to maximise competition in railway freight lines. He agreed with Cilliers that crime had to be tackled much better as it was discouraging investment as well as acting as a deterrent to economic activity inside South Africa because, for example, citizens were fearful of using public transport to go to work. Rule of law He said the rule of law was the foundation of all other economic reforms, followed by macroeconomic stability, and then better education and health, and only after that global competitiveness and industrial masterplans. Sarupen did note though that South Africa's foundation of macroeconomic stability was 'probably one of our saving graces'. He also said that the government had to reduce debt. He noted that about 90% of South Africa's debt was denominated in rands, and about 75% of that was purchased by domestic markets. Rand debt was generally better than debt in foreign currency but the scale of government borrowing, about R300 to R400-billion a year, was crowding out the amount of capital that could be invested in business ventures and therefore growth. He added that the relatively high premium of about 11% on a 10-year South African Government Bond was discouraging businesses from investing in riskier ventures. He noted that many of the investments in this year's controversial national Budget were important — such as in public transport. He said, for example, that while a lower income worker in Vietnam earned a similar wage to a lower income worker in South Africa, the Vietnamese worker spent about 10% of his or her income on transport, the South African workers spent around 50%. 'People are going to work to earn money to be able to go to work,' he said. And this was diverting money away from workers buying goods and services, which was essential for economic growth. DM

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