The proposed 2 percentage point VAT increase from 15% to 17% is set to impact every South African household. While the government sees it as a way to boost revenue, consumers will feel the pinch on everyday expenses, especially when purchasing essential items like groceries, electricity, and fuel.
This article breaks down the real impact of the VAT increase with practical examples of how household budgets will be affected.
News: South Africa’s 2025 Budget Speech Postponed Amid VAT Hike Dispute
Understanding the VAT Increase
VAT is an indirect tax charged on most goods and services. It is included in the final selling price of products, meaning consumers pay it every time they make a purchase.
Let’s consider a product that costs R100 before VAT:
- Under 15% VAT, the total price is R115.
- Under the new 17% VAT, the total price becomes R117.
For every R100 spent, consumers will now pay R2 more.
Although R2 per R100 may seem small, over a month or a year, the total extra amount can add up quickly.
How the VAT Increase Will Affect Basic Household Items
While some essential food items (like maize meal, brown bread, rice, and vegetables) remain zero-rated, many household essentials still carry VAT.
Let’s look at a realistic monthly grocery basket and compare prices before and after the VAT increase.
Grocery Basket Price Comparison
| Item | Price Before VAT | Price at 15% VAT | Price at 17% VAT | Increase |
|---|---|---|---|---|
| 2L Sunflower Oil | R75.00 | R86.25 | R87.75 | +R1.50 |
| 2kg Washing Powder | R80.00 | R92.00 | R93.60 | +R1.60 |
| 1kg Chicken Fillets | R70.00 | R80.50 | R81.90 | +R1.40 |
| 2L Fresh Milk | R35.00 | R40.25 | R40.95 | +R0.70 |
| 1kg Cheddar Cheese | R120.00 | R138.00 | R140.40 | +R2.40 |
| 1kg Margarine | R50.00 | R57.50 | R58.50 | +R1.00 |
| 500g Instant Coffee | R120.00 | R138.00 | R140.40 | +R2.40 |
| 1kg Sugar | R25.00 | R28.75 | R29.25 | +R0.50 |
| 750ml Dishwashing Liquid | R35.00 | R40.25 | R40.95 | +R0.70 |
| Toilet Paper (9 Rolls) | R60.00 | R69.00 | R70.20 | +R1.20 |
Total monthly increase for this grocery basket: R15.45.
For a family buying this twice a month, that’s an extra R30.90 per month or R370.80 per year due to the VAT increase.
Impact on Other Household Expenses
Beyond groceries, the VAT increase will affect electricity, fuel, and services, increasing monthly expenses.
| Expense | Current Price (15% VAT) | New Price (17% VAT) | Increase |
|---|---|---|---|
| Electricity (R500 purchase) | R575.00 | R585.00 | +R10.00 |
| Petrol (50L @ R23/L) | R1150.00 | R1173.00 | +R23.00 |
| Public Transport (R30 per day, 22 days/month) | R660.00 | R671.00 | +R11.00 |
| Monthly Mobile Data (R200 package) | R230.00 | R234.00 | +R4.00 |
These expenses are essential, meaning the VAT increase will directly affect household budgets, reducing the money available for savings and discretionary spending.
How the VAT Increase Will Affect Different Households
1. Low-Income Households (LSM 1-4)
- Already spend most of their income on food and transport.
- Will struggle the most as even small price increases make a difference.
- Monthly increases due to the VAT increase could be R80 – R150.
2. Middle-Income Households (LSM 5-7)
- Will see significant price hikes in fuel, electricity, and groceries.
- Might have to cut back on savings or entertainment.
- Monthly impact: R200 – R400 more in expenses.
3. High-Income Households (LSM 8-10)
- Can absorb the extra costs but will still feel the increase.
- Monthly impact: R500 – R1,000 more in VAT-related costs.
Related: SASSA Grants vs VAT-Free Chicken: Which Offers More Relief for Struggling South Africans?
How to Reduce the Impact of the VAT Increase
1. Buy More Zero-Rated Products
- Focus on essentials like maize meal, fresh fruit, vegetables, rice, and eggs.
- Avoid luxury VAT items like processed foods and imported goods.
2. Bulk Buying & Promotions
- Purchase non-perishable VAT-inclusive items before the VAT increase takes effect.
- Use store loyalty cards to save money.
3. Reduce VAT-Applicable Expenses
- Limit eating out (restaurants charge VAT).
- Switch to cheaper household brands.
4. Use Public Transport More Efficiently
- Consider carpooling or monthly transport passes.
5. Save on Electricity & Fuel
- Use energy-efficient appliances.
- Reduce unnecessary fuel usage.
The 2% VAT increase may seem small, but over time, the cumulative cost on groceries, transport, electricity, and other household essentials can be significant.
Key Takeaways:
- Grocery bills will increase by R30 – R50 per month for an average household.
- Electricity, fuel, and transport costs will rise, straining household budgets.
- Consumers must adjust their spending habits to offset the VAT increase.
While the VAT increase will help fund government programs, it will place financial pressure on South African households. Being aware of the changes and making smart financial choices will help minimize its impact.
