The impact of a VAT increase on food security
Professor Julian May, director of the Department of Science and Innovation-National Research Foundation Centre of Excellence in Food Security at UWC
An increase in VAT from 15% to 17% would raise the cost of many essential food items and increase input costs for food production, transport, and retail, indirectly impacting even VAT-exempt staple foods.
Low-income households, which already spend a large share of their income on food, would face reduced purchasing power, likely leading to a shift toward cheaper, less nutritious diets and exacerbating risks of malnutrition and food insecurity.
However, not increasing VAT also presents risks, as South Africa is facing serious fiscal constraints, with high debt levels and growing demands for public spending.
Without additional revenue, critical programmes such as social protection, school feeding, and health services may suffer from underfunding, which could ultimately worsen food insecurity in the long term.
Given these trade-offs, alternative revenue-raising measures should be explored alongside or instead of a VAT increase.
Further progressive tax reforms, such as corporate tax adjustments, could generate revenue without disproportionately burdening the poor.
A sliding-scale VAT system could be a more equitable alternative to a blanket VAT increase, ensuring that higher-income consumers bear a greater share of the tax burden while minimising the impact on essential goods.
Under such a system, basic necessities, such as staple foods, public transport, and essential healthcare products, remain zero-rated, while luxury goods and non-essential services used predominantly by higher-income consumers would be taxed at higher VAT rates.
Finally, strengthening compliance and efficiency in tax collection, particularly by addressing illicit financial flows and tax evasion, has already improved government revenues without increasing the tax burden on low-income households.
If VAT is increased, mitigation strategies are essential to protect food security.
In 2024, expanding VAT exemptions to include nutritious foods, such as fresh chicken, tinned fish and peanut butter, may have already helped to prevent dietary deterioration among vulnerable groups.
Other food items, such as processed chicken products, could be included.
Social grants should be adjusted for inflation to maintain real purchasing power, while targeted subsidies for smallholder farmers and informal traders could help stabilise food prices.
Without such measures, a VAT increase could exacerbate poverty and inequality, making it harder for South Africa to achieve its food security and economic development goals.
