Household food basket cost more in March with VAT increase looming

The household food basket for a low-income family of four cost more in March than February and, with a VAT increase of 0.5% looming on 1 May, the outlook is grim for consumers who already battle to put nutritious food on their plates.

According to the Pietermaritzburg Economic Justice and Dignity Group’s Household Affordability Index, that tracks the prices of 44 basic foods from 47 supermarkets and 32 butcheries in Johannesburg, Durban, Cape Town, Pietermaritzburg, Mtubatuba and Springbok, the household food basket cost R5 329.36 in March, R16.14 more than in February and R51.43 more than in March 2024.

In March, 22 food items in the household food basket cost more, while 21 food items decreased in price and the price of oranges remained unchanged. What is worrying is that the prices of core staple foods in the basket – maize meal, rice, cake flour, white sugar, sugar beans, samp and cooking oil – all increased.

Mervyn Abrahams, programme coordinator for the group, says this is a problem as these items take up proportionally the most money in the household purse and are bought first. “This means that the diversity of the family diet depends on the total cost of the staple foods, as the more nutrient rich foods like eggs, meats, dairy and vegetables, are only bought after the core staple foods.”

ALSO READ: Modest decline in essential food prices but savings not always passed on

The price of core staples in household food basket increased

The core staple foods are principally starches and, therefore, the higher cost of staple foods is likely to reduce the amounts and quality of protein, calcium, fibre, vitamins and minerals in the family diet. All of these foods are also essential for bodies to function optimally.

In March meat prices came down according to the survey, except the price of frozen chicken portions which increased by 2%, with 10kg costing R410.41 and boerewors that cost 4% more. The prices of chicken feet, chicken gizzards, chicken livers, beef liver, beef, beef tripe and fish all decreased in March.

Food items in the basket which increased in price in March by 5% or more include: onions (5%), carrots (15%), butternut (7%) and cabbage (6%). Food items which cost between 2% and 5% more include maize meal (2%), sugar beans (4%), samp (3%), cooking oil (2%), frozen chicken portions (2%), curry powder (3%), wors (4%), spinach (3%), bananas (2%) and peanut butter (4%).

Foods that cost less in March include potatoes (-5%), chicken livers (-7%), fish (-5%), tomatoes (-7%), apples (-10%), stock cubes (-4%), eggs (-4%), chicken feet (-2%), gizzards (-2%), beef tripe (-2%), Cremora (-2%) and margarine (-3%).

The households food baskets in Johannesburg, Durban and Cape Town cost more, while the household food baskets in Springbok, Pietermaritzburg and Mtubatuba decreased in price.

ALSO READ: Household food basket: prices drop, but not for core staple foods

Consequences of VAT increase on household food basket

While low-income consumers have to contend with these prices, the 05% VAT increase that will affect how much they can spend on food is looming. With 22 of the 44 food items in the total household food basket subject to VAT, the increase will affect low-income consumers the most.

Food items subject to VAT made up 47% of the total cost of the household food basket in March, with the zero-rated food items costing R2 849.18 and the food items subject to VAT costing R2 480.17. VAT on the total household food basket came to R323.50 which means that 6.1% of cost of the household food basket is made up of VAT.

Abrahams says the total rand value of VAT on the basic food items in the household food basket is high compared to the amount of money families have available to spend on food. “VAT removes food items and money from the consumer’s purse that could be spent on more food, a bigger selection of food and better quality food.”

He says the proposal to increase the VAT rate by an additional 0.5% to 15.5% would increase the VAT on the household food basket for March by R10.78 to R334.28.

According to Abrahams the context of the VAT hike must be seen in the context of a food affordability crisis. The group’s data shows that:

• For a worker’s family of four members, where one worker is employed and earns the National Minimum Wage, there is a 47.4% shortfall in nutritious food, with less than R490.85 per person available to spend on food, far below the Food Poverty Line of R796.
• For families with children who rely on the Child Support Grant of R530 per month, the average cost of feeding a child a nutritious diet in March was R951. The Child Support Grant is 33% below the Food Poverty Line of R796 and 44% below the average cost to secure basic nutrition for a child.

ALSO READ: Zero VAT rating of products does not help poor people – expert

VAT increase will only hurt low-income families further

Abrahams says increasing the VAT rate in this context will only hurt families further and have consequences for the country’s social, health and economic outlook. “Hiking the VAT rate was an idea, a proposal – it does not have to be implemented. We do have other options to raise revenue that may be far less harmful to our people, businesses and economic growth.”

Although the finance minister proposed expanding the zero-rated basket to protect vulnerable households from the high cost of living and the possible VAT hike, this will not help low-income consumers much.

The expanded list of zero-rated food items includes canned vegetables, dairy liquid blends and organ meats from sheep, poultry and other animals. In the household food basket, these additional items may be chicken feet (2kg), chicken gizzards (2kg), chicken livers (2kg), beef livers (2kg), tripe (2kg) and baked beans (6 cans).

These items cost R526.91 in March, including 15% VAT. If these items were to be zero-rated, the saving would be R68.73 when their price is reduced to R458.18.

ALSO READ: Budget 2025 VAT exemptions show Treasury’s disconnect with poor people

Potential saving with more zero-rated foods depends on several factors

Abrahams says if the zero-rating of these food items does come to pass, it could result in a possible saving but the potential saving depends on several factors:

• Are these foods affordable as zero-rating an item does not necessarily mean that a food item is all of a sudden affordable – it may be a bit cheaper but still unaffordable?
• Do producers and retailers pass on the VAT-exemption savings to consumers?
• Do these food items remain affordable over time (if the VAT-saving is not subverted by higher prices on these items, making the VAT-exemption superfluous)?
• Do low-income consumers choose to buy these food items for their families as they also have food preferences and health considerations as some of these foods may not be suitable to all family members?
• Does it take longer to prepare these foods and which types of meals can be made with them?

ALSO READ: Budget speech: VAT increase decision not made by someone who knows hunger

Will zero-rating these foods in household food basket help?

“We do not know if zero-rating the foods as proposed by the minister will be helpful. Zero-rating offal and not also frozen chicken portions, peanut butter and margarine would have been more helpful for households in terms of better and more common sources of protein and fats and mitigating against the high cost of living and the possible VAT hike.

“It may also have sent a better message to South African households who struggle on low-incomes and who have over the years turned to offal not generally as a preference, except for infrequent purchases, but out of necessity to try to source some type of cheaper protein for their families.”

Abrahams says there is also a question of whether VAT should not be removed from all animal products to release greater demand from a much larger section of our population who want to buy meat but who are constrained by affordability. He believes this step may help consumers and farmers and accelerate economic growth.