Tax hikes and loans for a Covid-19 vaccine – South Africa has to bite the bullet: Treasury

The National Treasury is looking at a number of available options to raise money to pay for South Africa’s Covid-19 vaccines, including a possible tax hike.

In an interview with 702, Treasury director-general Dondo Mogajane said that South Africa typically gets money from two sources – taxes and borrowing from the market.

“None of the two options are ideal as you can imagine. However, at this point in time, we are facing a pandemic and the president confirmed that we will do anything possible to ensure we find the money,” he said.

Mogajane said that the reprioritisation of existing budgets was one option; a second option was to borrow more and increasing the deficit. The third option was taxing citizens to make up the shortfall.

He said that an official decision will be communicated in Finance minister Tito Mboweni’s budget on 24 February, and will be detailed thoroughly to indicate where the money comes from.

Despite the financial considerations, the director-general said that ultimately the decision was about saving lives.

“One way or the other, we will have to bite the bullet, we have to do it for the sake of South Africans and saving lives. We have to do everything in our power to make sure that we buy these vaccines and vaccinate South Africans.”

The Department of Health has estimated a maximum cost of R20 billion to vaccinate the entire country, while more recent internal estimates done by the Treasury are far lower than this.

Last week, president Cyril Ramaphosa said the country will get an initial 20 million doses, with the first batch of 1.5 million shots of the vaccine developed by AstraZeneca set to arrive this month.

On Monday, Department of Health officials indicated that the country had secured an additional nine million vaccines through a deal with pharmaceutical company Johnson & Johnson.

The J&J deal will take the total number of doses that South Africa stands to receive to around 30 million.

Read: What economists say about another rate cut for South Africa