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South Africa's ANC wants to soften impact of higher VAT on poor

FILE PHOTO - African National Congress (ANC) Secretary-General Ace Magashule and members of the ANC National Executive Committee address a media conference in Johannesburg, South Africa, February 13, 2018. REUTERS/James Oatway

PRETORIA (Reuters) - South Africa’s ruling African National Congress (ANC) said on Sunday that it wants to alleviate the impact on the poor of an increase in value-added tax by adding more zero-rated and tax-free items.

ANC Secretary General Ace Magashule said in televised remarks the party would look at a range of measures to alleviate any negative consequences for the poor, including increases to the number of zero-rated and tax-exempted items.

The VAT increase, the first in 25 years, has raised concern over its effects on the poor from labour unions and civil society. It is likely to prove unpopular, with a national election due next year.

Finance Minister Malusi Gigaba announced on Wednesday the Treasury was taking the politically risky step of raising VAT to 15 percent from 14 percent starting in April, as part of its efforts to cut the deficit and stabilise debt.

The move is expected to generate an additional 23 billion rand (£1.4 billion) of revenue in 2018/19.

Magashule also said that party officials on Monday could discuss the issue of cabinet appointments under new President Cyril Ramaphosa.

“We don’t have an agenda tomorrow - it’s a normal officials’ meeting. If it comes it will be part of our discussions,” Magashule said in response to questions.

Ramaphosa, who was sworn in 10 days ago after his scandal-plagued predecessor Jacob Zuma stepped down, said on Tuesday he planned to take the lifestyles of future government officials into consideration as he put together a new cabinet.

Reporting by Dinky Mkhize; Writing by Tanisha Heiberg; Editing by Ed Stoddard and Larry King