Experts welcome expanded VAT-free foods basket but warn effects will be reversed by electricity hike

One in five households is severely food insecure. The latest Human Sciences Research Council food and nutrition survey, published in 2024, shows that households are running out of money for food well before the end of the month and regularly going hungry. A further 50% of households are moderately food insecure, struggling to put food on the table every day.  

The Finance Ministry was recently applauded for expanding the basket of zero-rated foods as part of a series of efforts to curb hunger in the country. Moreover, there was a focus on protein and vegetables in the expanded basket, which should help promote healthy choices.  

From Thursday, 1 May 2025, the list of VAT-free goods will include the edible offal of sheep, poultry, goats, swine and bovine animals; specific cuts such as heads, feet, bones and tongues; dairy liquid blends; and tinned or canned vegetables, Finance Minister Enoch Godongwana announced last Wednesday, along with grant increases, in the Budget speech. This is an effort to mitigate the impact of the upcoming VAT increase of 0.5% in 2025 and another 0.5% in 2026, raising the VAT rate to 16% by 2027.

However, researchers say there are missed opportunities to include items that can prevent stunting and provide nutrition, such as peanut butter and better-quality meat such as chicken portions. 

Mervyn Abrahams, programme coordinator at the Pietermaritzburg Economic Justice and Dignity Group, says the zero-rated basket expansion will contribute to a decrease of about R67,43 in the household affordability index once it comes into effect.

Read more: Food basket would be even more unaffordable with a VAT increase

However, Abrahams cautions that is not the full story because what people save they will pay in electricity. “We have to add electricity into the equation. We need it for cooking and food preservation, the fridge – you cannot eat beef livers raw,” he told Daily Maverick. 

Abrahams said they are calling for the first 350 kilowatts of prepaid electricity to be zero-rated in order for the zero-rated basket to have an impact. The cost of electricity will rise with the VAT increase and a 12.5% tariff hike in June, which Abrahams says will hit lower-income households and especially grant recipients, who will, by June when all these increases are in play, be a little worse off financially.

Civil society organisations, researchers and health advocates have been sounding the alarm on the high rate of stunting in children – 29% from 27% – along with obesity and other conditions that point to malnutrition. They have pointed out a lack of diversity on plates and, importantly, protein among culprits.

The price of offal and cheaper animal cuts has increased substantially due to the deepening cost-of-living crisis for low-income households, which has made people move away from higher-priced quality cuts of beef, lamb and chicken. 

Abrahams said “it is remarkable” that the government chose these foods to add to the basket instead of chicken portions, peanut butter and other sources of protein. He said people buy cheaper cuts largely due to affordability rather than personal preference. 

“The fact that the National Treasury focused on these foods almost reveals what they think of poor people, and what they think poor people must eat, rather than using the tax system to shape consumer behaviour towards healthier, more nutritious food,” he said. 

Zero-rating and protein insecurity

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