Today the Consumer Goods Council of South Africa (CGCSA) addressed the Parliamentary Select and Standing Committee on Finance where it called for National Treasury to urgently re-introduce the expansion of the list of zero-rated basic food items in the draft tax legislation expected to be shortly published for public comment.

In a country facing food insecurity, Neo Momodu, CGCSA Executive Legal, Regulatory & Stakeholder Engagement, submitted that expanding the list of zero-rated food products, poor households will be in a position to afford more healthy and nutritious food that would potentially otherwise have been beyond their means.

She says while CGCSA had welcomed the decision not to increase VAT, this had unfortunately led to the withdrawal of the Minister of Finance’s decision to expand the basket of VAT zero-rated food items to ease the burden of food costs on the poor and the vulnerable. In his first and second national budget statement for the 2025 fiscal year, the Minister had proposed expanding the basket of VAT zero-rated food items to include canned beans and peas, dairy liquid blends and certain organ meats (offal) from sheep, pigs, goats and poultry.

Subsequently, following the VAT increase reversal statement of 24 April 2025, National Treasury announced that “the decision not to increase VAT means that the measures to cushion lower income households against the potential negative impact of the rate increase now need to be withdrawn and other expenditure decisions revisited”.

Momodu said this decision is particularly concerning for the CGCSA and its members because many South Africans are hard hit by the cost of living and the zero-rating of the additional products would have gone a long way to not only cushion consumers but also improve healthy eating and healthy lifestyles, and improve food security.

“Although there is no doubt that the decision to retain the VAT rate at 15% (i.e. the decision to in fact not increase the VAT rate) results in benefits to consumers, this “win” for consumers must be properly unpacked: it has merely avoided one of the potential additional direct costs that consumers carry by maintaining the status quo. This “win” has in fact not created any positive means to reduce the existing burdens on financially vulnerable households.
“Maintaining the status quo is simply not adequate to provide any tangible difference to vulnerable households, or to manifest the socio-economic obligations on government to deliver food security to all persons, especially protected groups (including women, children and persons with disabilities).

“It would be an unfortunate outcome if the traction gained with regard to expanding the list of zero-rated items were to be lost because of seemingly erroneous and misplaced ties between expanding the zero-rated list and further tax increases. These two things are mutually exclusive and each bears interrogation on their own merits,” Momodu said.
She said CGCSA food manufacturer and retail members have and continue to find ways of ensuring that basic food items are sold at competitive prices, aware of the impact of food costs on their consumers, particularly the poor and disadvantaged.

In this regard, expanding the basket of VAT zero-rated food items would have been beneficial to consumers.
Concluding, Momodu said ways should be found to ease the untenable financial strain that South African consumers, particularly lower income households, are facing owing to the cumulative impact of above inflationary increases to taxes, levies and costs-of-living generally.
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