VAT hike: Food security policies should be strengthened to prevent increase in hunger, says NAMC
A study from the National Agricultural Marketing Council examines exactly how tax increases would impact the economy, the consumer and the agricultural sector.
Vegetables in a supermarket. Wikimedia Commons/Daderot
The Money Show's Stephen Grootes interviews NAMC agricultural economist Bhekani Zondo.
The contested 2025 national budget currently under consideration proposes an increase in several taxes including value-added tax (VAT) and excise duties.
These taxes are particularly relevant to the agricultural and food sectors, and a study from the National Agricultural Marketing Council (NAMC) examines exactly how hikes would impact the economy and of course the consumer.
It says that previous studies have shown how VAT increases can lead to a slight increase in poverty and inequality.
"Although the government plans to expand the basket of VAT zero-rated foodstuffs and not increase the general fuel levy to mitigate the impact of this increase on households; the general proposed increase in VAT means a more substantial portion of income of low- and middle-income households will go toward taxes, thus reducing their disposable income."
National Agricultural Marketing Council
Stephen Grootes talks to Bhekani Zondo, agricultural economist for Trade Research at the Council.
As Zondo highlights, an increase in VAT as well as in excise duties does have inflationary effects on the overall economy, which would be translated into higher retail prices then felt by consumers.
He also notes that these would affect output when it comes to food manufacturing, as well as the primary agricultural sectors.
"We saw that output sales will generally be negatively affected across all subsectors be it your livestock, horticulture as well as your field crops."
Bhekani Zondo, Agricultural Economist: Trade Research - NAMC
"In terms of food manufacturing - the agro-processing side, we saw that output sales will also decline be it in terms of meat processing, the grains as well as the fruits and vegetables."
Bhekani Zondo, Agricultural Economist: Trade Research - NAMC
This in turn means people will consume less, and government will then be getting less revenue from VAT, Zondo agrees.
Given the potential impact of a VAT hike on food affordability, strengthening food security policies should be prioritised to prevent an increase in hunger and malnutrition, says the NAMC.