National Treasury won’t extend list of zero-rated food items to ease cost of living

Minister of Finance Enoch Godongwana said they will not add more food items to be zero-rated. File Picture: Timothy Bernard/ African News Agency (ANA)

Minister of Finance Enoch Godongwana said they will not add more food items to be zero-rated. File Picture: Timothy Bernard/ African News Agency (ANA)

Published Oct 6, 2023


Finance Minister Enoch Godongwana has stuck to his guns that they will not extend the basket of food items to be zero-rated in a bid to mitigate the cost of living for the poor.

The spike in food prices in the last few months has left many households scrambling.

Godongwana said their position has not changed after the independent panel report in 2018 found that extending zero-rated food items would be inefficient. This was due to the fact that this benefits high-income families.

“The position of the Minister has not changed since the last oral reply. As indicated then, zero-rating of specific foodstuffs provides a larger proportional benefit to the poor (that is, progressivity is enhanced). Overall, goods have a progressive impact and a strong equity-gain ratio – poor people consume a relatively high share of zero-rated items. Nevertheless, the analysis of the independent panel in 2018 indicated that extending zero-rating to further food items would be inefficient, since high-income households tend to benefit more from such measures,” said Godongwana.

The minister, who was replying to a written parliamentary question from Dion George of the DA, said they will not change this position.

Last year Godongwana said they will not add more food items on the basket of items to be zero-rated.

He had said the items that were currently zero-rated were targeted at the poor.

Godongwana said if they extended the food basket of zero-rated food items it would benefit high-income families.

The cost of living crisis has led to political parties and civil society to urge government to intervene, as many families were struggling to survive.

Godongwana also said they were extending support to the agriculture sector to fight food insecurity.

There were concerns that the country could face food insecurity and the president called for a plan to deal with this.

Godongwana said they work closely with farmers through departments and this issue was being looked into.

“We acknowledge the importance of the agricultural sector in tackling the issue of food insecurity which can both be addressed by increasing availability of food and affordability of food. National Treasury provides fiscal support to departments to support the agricultural sector.

“The fiscal support for the agricultural sector is determined through the budget allocations to the Department of Agriculture, Land Reform and Rural Development, as articulated in the Estimate of National Expenditure - Vote 29 and to provinces though the Division Revenue Act, and this information is available in various provincial budgets.

“Consolidated spending allocations for agriculture and rural development, as presented in the 2023 Budget, are R27.8 billion in 2023/24, R28.6 billion in 2024/25 and R29.9 billion in 2025/26,” said Godongwana.

He said dealing with food insecurity was critical to ensure that that they keep the economy going.

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