Local traders say VAT hike will ruin their businesses
Johannesburg - Some shopkeepers in Soweto have decried the one percentage point increase in VAT, from 14% to 15%, announced by Finance Minister Malusi Gigaba in his Budget speech on Wednesday, saying the hike would severely affect their businesses.
Among them is Donald Manganyi, of Orlando East, who fears the tax hike, coupled with the fuel levy, will add to the many challenges he faces.
Most of his customers mainly buy kota (bunny chow) and magwinya (vetkoek) and nothing else. Manganyi complained that only kota and magwinya were keeping the business afloat while the rest of the items in the store were gathering dust on the shelves.
“It’s falling apart as you can see,” he said, pointing to the almost empty shelves. “The only foodstuffs that are generating profit are kota and magwinya. When I go to get stock I use the money I’ve made from these items.
“Essentials like maize and bread are slow. You see this maize, they don’t buy it any more. We even eat it in the house now.”
Manganyi and Sons is a family store that was started in 1958 and has been passed down through the generations. But after 60 years in business, the store barely survives because of the ongoing economic woes.
The store is now a shadow of what it used to be during the boom times, when it used to have many facets to it - selling fish and chips on the one side while running a photographic studio on the other, among others.
Over the years the studio was shut down and the store cut down on some of the grocery items and now confines itself to kotas and magwinya, said the 70-year-old.
Township traders like Manganyi have been bearing the brunt of unemployment because of their location in the townships. They are also facing stiff competition for a dwindling customer base from migrants such as Pakistanis, who sell most of their goods on the cheap because they claim that they buy in bulk and then pass on the savings to the consumers.
This week Gigaba announced in his maiden Budget speech an increase in the fuel levy and the VAT hike - the first increase in value-added tax in the democratic dispensation.
Although the government says zero-rated basic foodstuffs like brown bread, rice, lentils, vegetable oil and pilchards will remain untouched, this is little consolation for cash-strapped consumers and the unemployed.
For Mandisa Gqosha, a Soweto street seller and mother of two, the VAT hike strengthens her belief that the government is deaf to the plight of the people.
“They don’t think of us at all as the people. They hike the tax without considering what it might do to us,” she said.Gqosha makes a living selling sweets and atchar on the streets in the Khwezi station precinct, a business she said she started because of the hard times brought on by unemployment.
“I started in 2016 because I saw that sitting at home and doing nothing was not for me. If they can just create more job opportunities and decrease food prices, because this is killing us. Food is very expensive.
“I’m renting and living with my two children who are in primary school, and I look after them with the money I get from selling here.”
Milon Rahmed, a Bangladeshi who owns a tuckshop in Kliptown, said he noticed last year already that business had declined and he thinks the proposed VAT hike will worsen the situation. He's worried that people will begin to spend less on foodstuffs.
“I’m not making a lot of money, but it’s better than nothing,” he said.
The shop, which he inherited from his brother when he went back home five years ago, has been operating for 14 years.
“Years ago I used to make a lot of profit, now this stock you see is from last year. Business is very bad, and then there is the competition. There are too many shops.
“I’m not going to close the shop because business is like that. Sometimes it’s up and down, that’s the nature of business. Every month is different, but this 15% VAT is going to be too difficult and people are not going to afford to buy at our stores,” he said.
The Sunday Independent