Explore how the proposed VAT increase by Finance Minister Enoch Godongwana will affect South African households, particularly those earning below R8,000 per month.
Image: Ayanda Ndamane/ Independent Newspapers.
The proposed VAT increases by Finance Minister Enoch Godongwana over two years will mean a grim reality for many households who are already struggling to make ends meet.
A new study from the UCT Liberty Institute of Strategic Marketing revealed that many South African households earning less than R8,000 per month often rely on relationships with neighbours and relatives, borrowing from them to bridge the gap before their next pay.
The report noted that approximately 17 million South Africans live in households earning less than R3,500 per month, relying heavily on social grants and another 19 million people live in households earning between R3,500 and R8,000.
Moreover, the research found that the two income groups, often referred to as the “poor households” and "working poor" face severe financial strain, frequently making daily sacrifices like skipping meals.
Get your news on the go, click here to join the IOL News WhatsApp channel.
“For these households, every spending decision is carefully planned and scrutinised. They plan their spending based on specials. The financial pressure is so intense that many households struggle to meet even the most basic nutritional needs,” Paul Egan, the study co-author said.
Given that Godongwana has proposed the VAT increase, certain food items will be exempt from this price increase.
The current list of food items exempt from VAT
Brown bread | Rice |
Maize meal | Vegetables |
Samp | Fruit |
Mealie rice | Vegetable oil |
Dried mealies | Milk |
Dried beans | Cultured milk |
Lentils | Brown wheaten meal |
Pilchards/sardines in tins | Eggs |
Milk powder | Edible legumes |
| Dairy powder blend | Pulses of leguminous plants |
The list of VAT zero-rated food items has been expanded effective May 1, 2025, and may provide much-needed relief to vulnerable households, according to government.
The new items added to the list of zero-rated foods include edible offal of sheep, poultry, goats, swine, and bovine animals; specific cuts such as heads, feet, bones, and tongues; dairy liquid blend; and tinned or canned vegetables.
Treasury noted that the additional food items proposed for zero rating in the 2025 budget were targeted because there would be relatively limited revenue forgone to the fiscus.
“The government is very aware of the cost-of-living pressures faced by households, including high food and fuel prices and rising electricity and transportation costs. This is why we are taking concrete steps to protect vulnerable households,” Godongwana said.
IOL BUSINESS
Related Topics: