In his address to the National Council of Provinces last Thursday, President Cyril Ramaphosa threw his weight behind a proposal to expand the basket of goods exempt from VAT to include more essential food items.
This proposal, first suggested by an independent expert panel to National Treasury in 2018, has gained renewed urgency as SA faces a deepening food insecurity crisis. Expanding VAT zero-rating on basic foods could provide much-needed relief to millions of South Africans struggling with the rising cost of living.
Ramaphosa’s endorsement of this proposal could not have come at a more critical time.
The recent interest rate cuts by the Reserve Bank have been too slow to make a significant difference for the poorest. In a country where one in four households struggles to put food on the table, broadening the VAT exemptions is an urgent necessity given the growing food security crisis in our country which is forcing many families to make painful choices between food, housing and healthcare.
For many poor households, the price of bread, maize and milk is not just a matter of household budgeting – it’s a matter of survival.
The 2024 Household Affordability Index shows that the average cost of a basic food basket now stands at R5,348.65, making it unaffordable, especially for those dependent on social grants.
While there is no denying that such a policy is necessary, it would be naïve to completely discount the cost implications and whether the fiscus can afford it. It has the potential to polarise economists and policymakers.
Critics have argued that the government cannot afford the fiscal hit of expanding VAT zero rating, especially given SA's ballooning debt levels. Treasury collects R400bn a year from VAT.
While these concerns are valid, they fail to account for the broader social and economic benefits. The cost of inaction could be far higher.
The ongoing frustration and discontent over rising food prices could lead to greater social unrest, as more and more South Africans struggle to meet their basic needs. This could be far more costly to the nation than the temporary loss of VAT revenue.
The government faces a difficult balancing act ahead, but there is no denying that this is a step in the right direction – an acknowledgment that in a society as wealthy as SA, no one should go hungry because of an unaffordable grocery bill.
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SOWETAN SAYS | Expand zero-rated food basket
Image: JANA MARX
In his address to the National Council of Provinces last Thursday, President Cyril Ramaphosa threw his weight behind a proposal to expand the basket of goods exempt from VAT to include more essential food items.
This proposal, first suggested by an independent expert panel to National Treasury in 2018, has gained renewed urgency as SA faces a deepening food insecurity crisis. Expanding VAT zero-rating on basic foods could provide much-needed relief to millions of South Africans struggling with the rising cost of living.
Ramaphosa’s endorsement of this proposal could not have come at a more critical time.
The recent interest rate cuts by the Reserve Bank have been too slow to make a significant difference for the poorest. In a country where one in four households struggles to put food on the table, broadening the VAT exemptions is an urgent necessity given the growing food security crisis in our country which is forcing many families to make painful choices between food, housing and healthcare.
For many poor households, the price of bread, maize and milk is not just a matter of household budgeting – it’s a matter of survival.
The 2024 Household Affordability Index shows that the average cost of a basic food basket now stands at R5,348.65, making it unaffordable, especially for those dependent on social grants.
While there is no denying that such a policy is necessary, it would be naïve to completely discount the cost implications and whether the fiscus can afford it. It has the potential to polarise economists and policymakers.
Critics have argued that the government cannot afford the fiscal hit of expanding VAT zero rating, especially given SA's ballooning debt levels. Treasury collects R400bn a year from VAT.
While these concerns are valid, they fail to account for the broader social and economic benefits. The cost of inaction could be far higher.
The ongoing frustration and discontent over rising food prices could lead to greater social unrest, as more and more South Africans struggle to meet their basic needs. This could be far more costly to the nation than the temporary loss of VAT revenue.
The government faces a difficult balancing act ahead, but there is no denying that this is a step in the right direction – an acknowledgment that in a society as wealthy as SA, no one should go hungry because of an unaffordable grocery bill.
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