Since April, a 15% VAT increase has been added to goods and services. Economist Dawie Roodt said more petrol price increases were on the cards to further strain consumers. “South African consumers are under immense pressure and we are seeing increases in the most essential goods and services. And it is hurting consumers heavily,” Roodt said.
According to the Pietermaritzburg Agency for Community Social Action (Pacsa), the combined total of all foods subject to VAT in the comparison “basket”, R1477.24, had increased to R1698.83 with the recent VAT rate increase to 15%. Between March and April, the actual price of food (excluding VAT) decreased by R9.22 - but with the VAT hike included, the net increase was R4.27.
“Before the VAT hike came into place, and between September 2017 and March 2018, the actual and real cost of VATable foods (excluding and including VAT) increased by 5.5%, which saw it increase to R76.92 (excluding VAT) and R87.69 (including VAT). The total VAT component on the VATable foods increased by R10.77 (5.5%) over this seven-month period, with the total in March 2018 coming in at R208.10 on the Pacsa Food Basket,” the Pacsa report said.
According to Jorge Azevedo, head of business development at Indox - business process outsource provider - South Africa is one of the most consumer-indebted countries in the world, with a total outstanding consumer credit balance that stretched to R1.76 trillion last December due to dependence on credit. Added to the high food prices, municipal services had also been increased. In Cape Town households which consume less than 6kl will have to pay 10.10% more for water and sanitation. For the group that requires less than 4.kl a month, a 9.87% tariff will apply, while no tariff increase will come into play for usage of between 4.2kl and 7.35kl a month.
Janine Myburgh, president of Cape Chamber of Commerce, said: “Capetonians will feel the full impact of the City council’s rates and tariff increases this month, but for the first time there were tens of thousands of objections to the increases and the City was forced to back down in a number of areas,” she said.
Professor Raymond Parsons, economist at North West University, said recent research on take-home pay shows a mixed picture. “We must accept that 2018 is generally going to be a tough year for consumers. Although overall inflation will remain within the 6% upper limit of the Reserve Bank’s inflation target, a combination of factors ranging from the VAT increase to higher fuel prices will inevitably squeeze household budgets,” he said.
SA National Civic Organisation spokesperson Jabu Mahlangu said: “Though certain external factors such as the rand-dollar exchange rate that influenced the increase are beyond control, the runaway increases will increase inflation, and the higher cost of doing business, and food and other commodities, will hurt the poor more.”