The Congress of South African Trade Unions (COSATU) calls on the South African Reserve Bank (SARB)’s Monetary Policy Committee (MPC) to drop the repo rate at its meeting on Thursday.

COSATU urges the MPC to be bold and decrease the repo rate by at least 25 basis points when it announces its decision regarding interest rates later today. This should help working-class families and the poor to cope with the proposed VAT increase announced by the Finance Minister, Enoch Godongwana, in the budget speech. The Federation is deeply opposed to the VAT hike because the poor pay as much as the rich despite the endemic levels of inequality in the country. Unfortunately, the poor will be hardest hit.

Even though government has proposed to increase the number of food items in the VAT zero-rated basket, this will not adequately cushion the working class and the poor against the regressive tax hike. According to Statistics SA’s latest Expenditure Survey households spend more than three-quarters of their expenditure on non-food items such as housing, water, electricity, gas and other fuels, which are not exempt from VAT. Research also shows that people are already sacrificing food to pay for utilities.

In addition, an increased VAT rate risks slowing the economy because it discourages businesses from investing and worsens inequalities.

COSATU calls on the MPC to be bold given inflation held steady at 3.2% in February, falling on the low side of the Reserve Bank’s inflation target band; this should provide added incentive to drop the repo rate, countering the effect of the VAT hike.

Issued by COSATU

Zanele Sabela (COSATU National Spokesperson)

Mobile: 079 287 5788/077 600 6639

Email: zaneles@cosatu.org.za