The 2018/2019 National Budget Address was a much-anticipated event this year, given the political angst that surrounded it.
While there is certainly light at the end of the tunnel from a broader business perspective, with economic growth said to show significant improvement in the coming year at an average growth rate of 1.65%, there is no doubt that the ICT sector was left in a much less favourable position.
“With a VAT increase to 15% – the first increase in 25 years – and government’s SA Connect budget being reduced by over R1.7 billion, South Africans are sure to feel the pinch,” says Jaco Maree, CEO at WIRUlink.
While VAT increases will be offset by increases in social grants, which is great news in the lower, minimum wage income group, the middle-class consumer will be largely hit. The same goes for SME businesses – who already have smaller budgets and less disposable funds available.
If we couple this with a reduced spend on broadband infrastructure and connectivity, there is certainly a need to start thinking of ways to not only support education, but also to continually bolster GDP growth through broadband internet access provision to the masses. We need to think of ways to make broadband more accessible to the country.
The answer… zero-rated VAT Broadband internet access!
Imagine the far-reaching impact of zero-rated VAT Internet for both businesses, consumers and the sector at large. First off, without the added cost of VAT on connectivity, we will witness far quicker adoption of leading broadband internet services and what’s lost in VAT will be made up in GDP growth – where consumers and business will utilise more broadband for business, working from home, online transactions and so forth.
This type of move would be highly beneficial for the sector too, where 2017 statistics by ICASA indicated that the ICT market was set to grow by only 4.3% between 2017 and 2018, enabling stronger growth through the provision of cost effective solutions.
By removing the 15% VAT off broadband, consumers and businesses are less pressured to dig into their much smaller disposable incomes to ensure they can be connected effectively. The main driver of ICT investment has been to drive economic growth and so, there is no doubt that reduced costs and taxes on such services would be a strong contributor to the country’s GDP.
Furthermore, in 2013, government aimed to increase high-speed, affordable internet to 90% of the population by 2030. This was later reiterated through the launch of the Connect 2020 programme – aimed at bringing connectivity prices down and promised connectivity to 22 million South Africans by 2020.
In fact, according to the 2015 Global Connectivity Index, South Africa is one of the top three developing countries with the most potential to boost economic growth through ICT.
Imagine the possibilities of zero-rated VAT Internet in this regard – it could be a key driver. By doing so, government’s objectives of reaching their Connect 2020 goals – although put on hold for the time being – will be much more easily met.
It all boils down to affordability and creating potential for the mass expansion of broadband internet services to both business at large, as well as South Africa’s consumers. The less VAT people and businesses are paying, the more realistic the goal to expand internet to the masses will be, over a shorter period of time.
Broadband Internet Access empowers people to educate themselves, work more productively and increases the potential for innovation. Therefore, the impact of zero-rated VAT Broadband is far-reaching, it will mobilise organisations to provide services to the masses and enable consumers to afford high-speed, affordable broadband internet without breaking the bank.
Just think about the potential – zero VAT on broadband internet access!
WIRUlink strongly supports the implementation of these potential initiatives – those that drive broadband internet access to the masses. For more information, or to chat to WIRUlink, contact us at www.wiru.co.za.
This article was published in partnership with WIRUlink.