06/03/2018 05:46 SAST | Updated 06/03/2018 07:55 SAST

Nene: VAT Increase Is The Right Thing To Do

The finance minister says that government must now take the public into its confidence about the reasons for the hike.

Finance Minister Nhlanhla Nene.
Joshua Roberts / Reuters
Finance Minister Nhlanhla Nene.

Finance minister Nhlanhla Nene says he is satisfied that the VAT increase is the right thing to do, Business Day reported. Nene also told investors on Monday that South Africa has done enough to stave off a credit ratings downgrade. He reportedly met with the Moody's Investors Service on Monday.

According to Business Day, Nene said: "I have gone through the documents and had briefings and I am satisfied with the underlying reasons for the VAT hike. What remains now is to take the public into our confidence."

Government has come under fierce criticism for the hike in VAT, which many analysts have said will hurt the poor the most. Unions, civil society, religious leaders and others have all called for government to rethink its approach, or to at least expand the number of VAT exempt items.

He reportedly said he was positive that Treasury would revise the expected growth rate upwards, in line with the increase in business and consumer confidence.

"From my side I'm quite confident we presented a credible story," he reportedly said on Monday.

He said investors were not happy with the medium-term budget but that their attitudes were improving.

"They were unhappy with the medium-term budget policy statement, unhappy with our indicators, but they gave us the opportunity to get to the budget review. Moody's is here till Thursday and we've improved the weakness of our balance sheets, growth and governance of state-owned entities," he said, adding that the ratings agencies were pleased that government had "put dates to what we do".

According to MoneyWeb, Nene said a revised growth projection was likely in October's medium term budget. Treasury previously said GDP growth of 1.5% is likely this year.

"We do not want to be overly optimistic about these numbers. At the moment, they are pencilled in, but we are likely to revise these numbers upwards come the medium term budget in October," he said.

Meanwhile, Nene told unions federation the Federation of Unions of South Africa (Fedusa) on Monday that confidence in SARS needed to be restored. He said he felt like a man who had been kicked out of the house, returning to Treasury.

According to Daily Maverick, he said, ""So I told them that the long and short of it was that I've been on sabbatical. We are at a point where we need to look back and reflect on a number of things that have happened. We've seen the country going in the direction that some of us began to feel that we are not serving the interests of the generations that will come after us...

"We've seen how tax morality has deteriorated. When that happens it is a sign of loss of confidence in the state when people begin to say, 'Why must we pay taxes when our taxes are spent in the reckless manner we have seen in the past?'."

Nene said government needed to clamp down on corruption.

"You must have seen how some of the law enforcement agencies are actually beginning to find their muscle in order to do what they're supposed to do which in the past we haven't seen. We're getting people charged, we are getting investigations and there are no holy cows when it comes to that."

He reportedly said that he had "tried to fight" when President Cyril Ramaphosa asked him to return to the post of finance minister, but that "when national duty calls, everything else falls away."