VAT hike, trade wars crush SA consumer confidence

South African consumer confidence crashed deeper into negative territory in the first quarter (Q1) of this year as the Budget VAT spat and Trumpian trade wars smashed a gaping hole in sentiment. 

The quarterly FNB/BER Consumer Confidence Index (CCI) shed a steep 14 points, falling to -20 from -6 in Q4 of 2024. 



“The fieldwork for the first quarter CCI survey commenced only days after the Finance Minister’s (aborted) proposal to hike VAT by two percentage points came to light (when the 19 February budget speech was postponed),” FNB said in a statement on Tuesday. 

“The prospect of significantly higher taxes – either via VAT hikes or further bracket creep on the personal income tax front – likely alarmed many consumers. Even though the March Budget (which took place after the fieldwork ended) softened the VAT hike, it still places a significant tax burden on consumers.”

FNB also noted the souring of diplomatic relations between South Africa and the US and Donald Trump’s trade wars, as well as the return of rolling power cuts, as factors that weighed on sentiment.

“The first quarter reading of -20 is also the lowest CCI reading since the first half of 2023 and signals an alarming deterioration in the outlook for consumer spending following the strong end to 2024,” FNB said.

Consumer spending got off to a brisk start in 2025. Retail trade sales rose a robust 7.0% year on year in January compared with 3.2% in December.

This was partly a reflection of expenditure linked to early pension withdrawals under the two-pot reforms introduced late last year, and it bode well for the retail sector this year. 

But consumer confidence has now crumpled and the South African Reserve Bank’s decision to hold interest rates steady last week after three straight 25 basis point cuts will also not help to underpin sentiment. 

“While we did not anticipate an improvement in consumer sentiment in Q1 2025, the 14-point decline in the consumer confidence index (CCI) was far greater than we had expected,” said Jee-A van der Linde, senior economist at Oxford Economics Africa. 

“While we still believe that consumers’ spending ability will strengthen modestly in 2025, driven by improved economic activity, their willingness to spend may diminish.”

The bottom line is that the reading is an ominous sign for the retail sector and the wider economy. DM