'Businesses have already spent huge sums on preparing for VAT hike that's now been reversed'

The Money Show's Stephen Grootes talks to Busi Mavuso (BLSA CEO), Alan Mukoki (CEO, South African Chamber of Commerce and Industry) and tax executive Charles de Wet (ENS).

As political parties bicker about who should take credit for government's withdrawal of the value-added tax (VAT) increase, the country, and business is starting to count the cost of National Treasury's U-turn.

The decision to backtrack on the 0.5% VAT hike was announced on Thursday, less than two weeks before it was set to kick in on 1 May.

On The Money Show, Busi Mavuso, CEO of Business Leadership South Africa (BLSA), decries the 'spectacle' that has ensued since the tabling of the original national budget didn't happen.

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Mavuso highlights the negative consequences for South Africa as a country as well as the burden placed on businesses that have spent time and money preparing for the planned tax increase.

"The differences could have been resolved in time... This is negative for business sentiment; negative for the investor community and, as things stand, businesses had already spent extensive sums of money to ensure that the VAT increase is accommodated."

Busi Mavuso, CEO - Business Leadership SA

"Restaurants have had to get new menus printed, retailers have had to do price system updates, others had spent huge sums on letting their customers know about premium adjustments as a result of the VAT increase."

Busi Mavuso, CEO - Business Leadership SA

It is precisely things like these that erode confidence in a system, and in an institution, Mavuso says.

And this after so much energy and resources have been spent as a country trying to restore confidence in ways ranging from structural reforms to the restoration of SARS, she laments.

While better communication was required on the part of government during this budget saga, business should also have understood the process better, Mukoki remarks.

"I think it could have been handled better by both sides, the private sector as well as the public sector. The approval of the fiscal framework is not the same thing as legislation... Companies went out of their way to start preparing when they had not seen the President signing the bill that should go hand in hand with that particular framework."

Alan Mukoki, CEO - South African Chamber of Commerce and Industry

"I think we all have to learn that in future we should know that a framework is not a bill; that a government cannot levy any charge on you until that is a a function of legislation in that government."

Alan Mukoki, CEO - South African Chamber of Commerce and Industry

Scroll up to the audio player to listen to the conversation

'Businesses have already spent huge sums on preparing for VAT hike that's now been reversed' - BLSA

Business Leadership SA's Busi Mavuso looks at the cost to South Africa after the budget 'spectacle' that's finally resulted in a U-turn on the VAT increase.