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22 February 2017


The Health and Other Service Personnel Trade Union of South Africa (Hospersa) is appealing to Finance Minister Pravin Gordhan to alleviate the ever-increasing financial pressures faced by working people, when delivering his annual Budget Speech on this afternoon.  The Union warns against increases in income tax, Value-Added Tax (VAT) as well as other forms of taxation and costs borne by workers.  Hospersa also urges Treasury to find new ways to address irregular and wasteful expenditure due to poor management and corruption in the public sector – specifically public health.


There have been a variety of reports and rumours regarding what the annual Budget Speech might look like and, like every year, the speculation is based on wishes and fears.  Most analysts agree that we might see an increase in personal income tax, and there has even been talk of increasing VAT.


“As a trade union looking after the interests of working people, Hospersa has to warn against the increasing pressures faced by our members,” said Hospersa General Secretary Noel Desfontaines.  “With rising cost of living, including increased costs of transport, housing, food and clothing, most South Africans are feeling the pinch – and we have been for quite some time.  If you add to this the pressure of higher interest rates charged by commercial banks, coupled with the fact that most of our members are forced to borrow money to buy property, vehicles and other necessary items, the pressure seems to become unbearable,” Desfontaines added.


During the period from last year’s Budget Speech, the inflation rate as measured by the Consumer Price Index (CPI) rose with an average of 6,36%.  Even though the second half of 2016 saw the Monetary Policy Committee (MPC) keeping the repo rate at a steady 7%, the fluctuations of the exchange rate due to various factors have put enormous pressure on working people.  Added to this are upward fluctuations in the fuel price as well as other necessary costs like water and electricity, with the compound effect on food and other retail items.


“Although we realise that tax is a necessary element in paying for public services, the burden on working class and lower middle class families is frankly becoming too much,” said Desfontaines.  “To now go and put further pressure on these hard-working people will surely be the last straw that might break the camel’s back,” he added.


Even though South Africa’s VAT rate at 14% is low compared to other tax jurisdictions in similar countries, there is general consensus that VAT is a regressive form of taxation.  And, although VAT is pegged at approximately a third of earnings of tax, raising VAT could have a negative impact on inequality, real Gross Domestic Product (GDP) growth and inflation.  Raising VAT will obviously also add strains to small business, which will have a negative impact on job creation and economic growth.


“The idea of increasing VAT is simply ludicrous,” Desfontaines said.  “VAT is already a form of tax that unfairly discriminates against low-income families in that it constitutes a larger portion of their necessary expenses.  Poor people spend much more on food and basic purchases, and often they buy from small spaza shops where the prices are high and the transactions are many.  Higher prices then hit them again as they pay VAT as a percentage [of the higher price paid to the retailer],” Desfontaines argued.


There have also been reports of certain new taxes and costs which might be announced by Gordhan.  This includes an additional tax on higher income earners as well as higher-than-inflation increases in the so-called sin taxes on liquor and tobacco products.  This might lead to a new level of black market trade and lead to resultant job losses in the formal retail sector.


“Treasury must be careful not the kill the proverbial goose that lays the golden egg,” warned Desfontaines.  The working class and lower middle class together constitute the worker bees in South Africa, and our ultimate social and economic success depend on the sustainability of our fiscal policy, matched with adequate levels of service delivery and social protection.  We need to look after the workers,” said Desfontaines.


Last year the Auditor-General, Mr Kimi Makwetu reported a more than 100% increase in irregular expenditure at local government level.  That calculates to a total of R14,75 billion in the previous financial year, of which fruitless and wasteful expenditure increased to R1,34 billion and R15,32 billion was due to unauthorised expenditure.


This led to many cities and towns experiencing challenges with basic services like electricity, water and refuse removal.  Again, the combined effect of poor management and lacking oversight combine with corrupt procurement processes to create a vicious cycle of which the working man and woman must bear the brunt.


“Apart from looking at how to raise state income, perhaps the state must also look at how it is spending its money.  Poor management, corruption and general failures in service delivery are costing us dearly.  The best way to ensure a decent life for all, is to ensure that the economy grows and that more people get decent jobs.  They can then also pay taxes and thus broaden the tax base.  Our government’s failures in basic public services like health, education and safety are keeping us from doing this,” Desfontaines said.


Health is one of the most basic and crucial services to be provided by the state, and in our country it is estimated that more than 85% of the population are dependent on public health facilities.  Still, the conditions and capacity at most public health institutions are often found wanting, while the combined effect of poor decision-making and corruption only exacerbates the structural challenges even more.  Many doctors, nurses and other health workers are expected to work in unsafe and often dangerous conditions, and the general overload and lacking facilities lead to levels of low service delivery which often borders on a violation of basic human rights. 


“Hospersa calls on the Finance Minister to address the staffing issues that have plagued public health where many graduate professionals remain unemployed due to reported lack of job opportunities in public health.  Any taxes collected by the Minister need to be plugged into the public health’s fiscal budget, along with strict monitoring measures to guard against poor and corrupt decisions by those in charge of the public purse,” Desfontaines concluded.



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For interviews please contact Hospersa General Secretary Noel Desfontaines – 083-321-4427.


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