How to navigate the pending VAT increase in your daily life

A VAT increase of 0.5% is looming on 1 May and with the usual seasonal price hikes across various sectors, such as insurance and electricity, South African consumers face a tightening financial landscape.

As South Africans brace for the impact of these financial changes, it is crucial to adopt proactive strategies to manage expenses and ensure financial stability, Denise Neethling, head of marketing at financial wellness company Paymenow, says.

Recent statistics from Statistics South Africa highlight the challenges consumers face, with prices in the food and non-alcoholic beverages category seeing a year-on-year increase of 9.1% in January 2025, while transport costs increased by 8.6%. With interest rates remaining unchanged, consumers feel the pressure on their disposable income.

“Consumers must be proactive as we face the upcoming VAT increase, which will have a widespread impact on everyday expenses, affecting everyday costs from groceries, transport, airtime and data to your favourite takeaway,” Neethling says.

“As we continue to navigate rising living costs, it is essential to adapt our financial habits, especially as current inflation and interest rates offer little relief.”

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Useful tips for living with the 0.5% VAT increase

Neethling has these useful tips to help South Africans manage their finances when the 0.5% VAT increase is implemented:

• Create a comprehensive budget: Start by reviewing your monthly expenditure. List all essential and non-essential items to identify your current cash flows and cut back where you can on luxuries in anticipation of higher prices. Also be aware that many fixed expenses, such as medical aid, transport and electricity, will cost 0.5% more.
• Shop smart and plan: Take advantage of sales, discounts, vouchers and loyalty programmes at grocery stores and retailers. Plan your shopping trips around special promotions to maximise your savings and reduce grocery spending by planning meals for the week. Buy ingredients in bulk and prepare meals in advance to avoid last-minute takeout trips, which can be more expensive.
• Track you subscription services: Review any ongoing subscriptions or memberships and cancel those that you do not use frequently to free up additional funds.
• Monitor your utility usage: Switch off lights when not needed, unplug chargers and transition to energy-efficient LED bulbs to lower your electricity bills. Practice mindful water usage to decrease your water bills. Explore options like solar geysers to reduce long-term electricity usage.
• Plan for emergencies: It is always a good idea to build a small emergency fund that can provide a financial safety net for unexpected expenses that may arise due to price increases. Ideally. this fund should be enough to cover your expenses for three months. If that is too much, start with saving a fund of R1 000.
• Use financial tools: Investigate if you are eligible for new financial solutions such as earned wage access, which allows access to your already-earned wages before payday. This can temporarily alleviate your cash flow issues and help you to manage expenses without turning to payday loans.
• Use free resources: Take advantage of free financial literacy resources offered by companies. Most major banks in South Africa also have free financial resources available online. Increasing your financial knowledge can empower you to make better financial decisions.

Neethling says as we prepare for the upcoming VAT increase, these practical tips can assist South Africans in managing their finances more effectively and making informed choices.

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