South Africans call for VAT to be scrapped for more food as prices soar

More South Africans have come out in support of the call to expand the zero VAT-rated basket of food items in South Africa considering the rising cost of living throughout 2023.

Despite some people criticising the price of items like coffee, which was raised by the Democratic Alliance, they have argued that these products are not necessarily essential for poor households and will prove Minister of Finance Enoch Godongwana’s point.

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In a parliamentary Q&A last week, Godongwana was asked whether he would consider expanding the zero VAT-rated food basket in South Africa as a direct intervention to fight the cost-of-living crisis that was notable by the upward-spiralling high food prices that are squeezing the average South African household. “My position has not changed since the last oral reply.

Proportional benefit to the poor

As indicated then, zero-rating of specific foodstuffs provides a larger proportional benefit to the poor,” said Godongwana. “Overall, goods have a progressive impact and a strong equity-gain ratio – poor people consume a relatively high share of zero-rated items.”

Thokozile Madonko, a research manager at the Public Economy Project at the Southern Centre for Inequality Studies at Wits University, said South Africa needed a combination of solutions to deal with the cost of foods and that extending the zero VAT-rated basket of food items was the least likely solution.

“Part of it is that the reason we have higher prices of food is because of external shocks plus the war in Ukraine and the price of oil as well,” she said. “Then we have domestic issues like Eskom and Transnet.

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“The other thing we have is the question of whether some retailers are not taking advantage of the situation and increasing prices even further.” She said solutions that were more likely to work would include a radical move like price controls for essential goods and services.

Better wages

“When you realise that poor households are not just dependent on food essentials, but also have to buy electricity, fuel, paraffin, data – things that are not zero-rated – it does not help,” she added.

She said solutions that would help would be better wages, job creation, and increasing grants to above inflation so that people could afford the products.

A consumer, Thembi Mhlaba, 39, said it was no longer about the products, but alleviating the pinch of food prices that had risen significantly over the past year.

“People do not even care about specifics anymore especially when it comes to food. The only thing they are constantly concerned about is access and being able to afford your way through life,” she added.

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She agreed with Madonko and said zero-rated items could not be the end goal. “We all have different needs. Imagine having to choose whether you deserve coffee or you’re subjected to tea because you’re poor.”

Last month, the Competition Commission said South Africans were paying more than they should for certain food items even though inflation had come down significantly to the commission’s latest essential food pricing monitoring report.

The latest Household Affordability Index by the Economic Justice and Dignity group showed that food prices last month were about 7.3% higher than in 2022.