Ramaphosa OPA: VAT exempt products and fuel price formula to be evaluated

Easing the financial strains on citizens was one of the many objectives laid out in President Ramaphosa’s opening of parliament address (OPA.

Energy, investment, healthcare and employment were also on the president’s list of priorities, upholding the unifying intentions of the government of national unity (GNU).

The everyday cost of living is what may guide sentiment towards the GNU, via the experience when filling up grocery carts and fuel tanks.

VAT exempt product list

Value Added Tax (VAT) is a sales and consumption tax which sees 15% added to the price of all goods and services.

South Africa has 19 basic food items exempt from VAT, including brown bread, rice, maize meal, eggs and vegetables.

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By adding items to this list, Ramaphosa signals an intention to make each rand stretch fractionally further for the average citizen.

“We will look to expand the basket of essential food items exempt from VAT and undertake a comprehensive review of administered prices, including the fuel price formula, to identify areas where prices can be reduced,” said Ramaphosa during his address.

Fuel Price calculation

International factors contribute greatly to the petrol price, but the government imposes two charges on top of the base cost of fuel.

The General Fuel Levy is a tax added to every litre of fuel purchased, while the Road Accident Fund (RAF) levy is used to compensate victims of automobile accidents.

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Unlike the price of petrol, these figures are adjusted annually. In 2023, the general tax stood at R3.96 and the RAF levy accounted for R2.18 of the per-litre price.

In finance minister Enoch Godongwana’s February budget speech, he left the taxes unchanged, so motorists must wait until the next budget speech to find out if the GNU will stay true to its word.

Commitment to existing frameworks

Ramaphosa prefaced his targets with a commitment to the National Development Plan Vision 2030, United Nations’ Sustainable Development Goals and the African Union’s Agenda 2063.

“We have decided to place inclusive economic growth at the centre of the work of the GNU and at the top of the national agenda,” stated the president.