That Mooted VAT Increase Was Actually 13.33%

• When 2% is Actually 13.33%
• How to Spin Percentages Positively (sort of)

The recently postponed budget speech following dissension in the ranks of the GNU was, to most reports, as a result of a proposed increase in VAT of two percentage points – from 15% to 17& VAT.

As any PR Professional or Journalist will tell you – any reaction to data is dependent upon how you present the good/bad news.

In any normal price increase situation a business will report an increase in prices by using a percentage – e.g. a 10% increase – in that way the general public can reference known numbers like the general inflation rate and even salary increase percentages to determine if the increase is palatable or not.

For the last two years South Africa’s published inflation rate (CPI) has hovered around 3% per annum.

The GNU were intending to report the number of percentage points increase in VAT (2%) rather than the actual percentage increase of VAT (13.33%) which is far in excess of the inflation rate – a number that the VAT man benefits from in the same way that SARS benefits from inflationary bracket creep.

Reporting the lower (true) number is a typical spin tactic as 2% is far more palatable than 13.33%.

There is a lesson in there somewhere.

South Africa’s Finance Minister, Enoch Godongwana, said in his leaked budget speech, that was meant to be delivered to Parliament on Wednesday, 19 February 2025, that the increase in VAT was to finance wage increases for civil servants along with other departments.

We propose to raise the VAT rate by 2 percentage points to 17 per cent – a necessary step that will enable us to:

• Fund public sector wage increases for our civil servants
• Expand early childhood development opportunities for our children
• Retain the teachers, doctors, and essential frontline workers that serve our communities
• Revitalise our commuter rail system to better serve working-class families
• Provide above-inflation increases to social grants for our most vulnerable

So what is to be done with the 19 February announcement by the Public Service Co-ordinating Bargaining Council (PSCBC) that they had successfully concluded wage negotiations with a wage Increase, 5.5% for 2025/26, with future increases (2026/27 & 2027/28) linked to the Consumer Price Index (CPI).

The CPI is the official measure of inflation in South Africa.

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