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SA wrestles with how to offset rising living costs

South African Finance Minister Enoch Godongwana said there’s a legitimate argument for shielding the poor against the impact of rising living costs, but determining the kind of support that should be provided and how to pay for it remains a work in progress.

“We need to discuss what is the appropriate form of cushioning the vulnerable,” the minister said in an interview in Johannesburg on Thursday. “The next set of issues then is how are we going to fund that.”

The government began paying low-income households monthly grants of R350 after the onset of the coronavirus pandemic in 2020, and has renewed the temporary stipend three times since then. Last month, it was extended until the end of March 2024. Civil rights groups have been pushing for a permanent income grant, a proposition the National Treasury has resisted so far.

Further support can only be financed with additional taxes or by reprioritising spending, or a combination of both, according to Godongwana. But increasing personal income taxes will exacerbate the problem of rising living costs, raising company levies will result in workers being fired, and value-added tax is a “blunt instrument that hurts the poor and rich alike,” he said.

© 2022 Bloomberg


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