By Staff Reporter
The Congress of SA Trade Unions has called on the SA Reserve Bank’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…. This should help working class families and the poor to cope with the proposed VAT increase announced by Finance Minister Enoch Godongwana in the budget speech,” Cosatu spokesperson Zanele Sabela said in a statement.
“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.”
She said that even though the government has proposed to increase the number of food items in the VAT zero-rated basket, this would 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 money on non-food items such as housing, water, electricity, gas and other fuels, which are not exempted from VAT.
In addition, an increased VAT rate risked slowing the economy because it discouraged businesses from investing and worsened inequality, Sabela said.
“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,” she said.
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