vat relief on food for poor considered 
06 May 2008

The global escalation of food prices has thrown millions of poor into starvation, leading governments and multinational organisations to adopt emergency measures. The cabinet set up an inter-ministerial committee last month to come up with urgent proposals to alleviate the crisis for the poor.   The committee, consisting of the education, public works, finance, social development, health, minerals and energy, and trade and industry ministers and the Presidency is to meet again on Friday to consider a report arising from tomorrow’s meeting of their respective directors-general .

Apart from possibly extending the list of VAT zero-rated food items, other food aid options include food vouchers or cash transfers, acting agriculture director-general Kgabi Mogajane said.

Milk, mealie meal, brown bread, vegetables and fruit are among the basic foodstuffs on which no VAT is paid.

Before extending the zero-rated food list, however, the government would want to make sure that the tax relief most benefits those who need it and not the well-off. Social development director-general Vusimuzi Madonsela suggested a combination of food vouchers for those who did not receive any social grants, and an increase in the size of some grants to those who did.If ways could be found to distribute food vouchers speedily and efficiently, then this would be preferable to the food parcel scheme which had created many challenges because the government had had to rely on outside food distribution companies. In many cases legal battles over tenders had delayed the distribution of urgently needed food assistance to the poor.

The inter-ministerial committee will also have to consider whether, and by how much, to increase the allocations to existing feeding schemes such as the school nutrition programme to take account of the sharp price hikes. Government officials rejected suggestions of price controls or export bans as ways of halting the escalation of food prices.

Health Minister Manto Tshabalala-Msimang said an appeal would be made to manufacturers to limit price increases.

Linda Ensor,  www.businessday.co.za