South Africans will soon be paying more for everyday essentials as the government considers an increase in Value Added Tax (VAT).
Finance Minister Enoch Godongwana said in the 2025 Budget Speech that government proposes to increase South Africa’s VAT rate by 0.5 percentage points in 2025/26 and 0.5 percentage points in 2026/27.
This will bring the VAT rate to 16% in 2026/27. This proposed hike has sparked concern, particularly among low-income households already struggling with rising costs.
What the VAT hike means for your grocery bill
If implemented, the VAT increase will affect nearly all goods and services, excluding a limited number of zero-rated food items. According to the Pietermaritzburg Economic Justice and Dignity Group (PMBEJD), a household’s basic grocery basket could see an increase of approximately R375.16, bringing the total cost to R5,477.84. Essential toiletries and domestic products will also rise by R154.57, reaching R1,063.82. These increases, combined with an electricity price hike of 12.7%, will place additional financial strain on households.
Who will be hit the hardest?
The proposed VAT increase is expected to disproportionately impact low-income households, who already allocate a significant portion of their income to food, electricity, and other essentials. PMBEJD warns that such an increase could deepen poverty levels, widen economic inequality, and push more families into financial distress.
Small businesses are also likely to suffer. With operational costs increasing, many businesses may struggle to remain competitive, leading to potential job losses and economic slowdown.
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Which grocery items are VAT-free?
While most goods will see price increases, certain staple food items remain exempt from VAT, helping to cushion the blow for lower-income households. The current list includes:
- Brown bread
- Maize meal
- Rice
- 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
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As of May 1, 2025, additional food items have been added to the zero-rated list, including edible offal from sheep, poultry, goats, swine, and bovine animals; dairy liquid blends; and tinned or canned vegetables.
Is there an alternative?
Economic experts and advocacy groups argue that increasing VAT is not the best solution to South Africa’s fiscal challenges. PMBEJD suggests that alternative revenue sources should be explored to prevent further economic hardship, particularly for the most vulnerable communities.
With living costs already on the rise, a VAT hike could make everyday essentials even less affordable for many South Africans. As the debate continues, households are advised to budget wisely and make the most of VAT-free food options to mitigate the impact on their grocery bills.
This article was originally published by Food&Home.
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