Government’s VAT-free offal offer is not best nutritional choice: report

The government’s move to make offal VAT-free instead of rich protein sources such as peanut butter and chicken portions will only serve to make nutritious food less accessible to low income families.

This is according to the latest Household Affordability Index report, compiled by the Pietermaritzburg Economic Justice and Dignity Group (PMBEJD), which shows many South Africans have turned to offal not out of choice but necessity as a cheaper protein source.

Finance minister Enoch Godongwana announced during his recent budget speech more food items would be included on the VAT-free list including organ meats from sheep, some poultry and other animals, canned vegetables and dairy liquid blends.

This is aimed at cushioning the blow from the impending 0.5 percentage point VAT hike.

“Zero-rating offal and not also frozen chicken portions, peanut butter and margarine, which is likely to have been more helpful to households in terms of proving better and more common sources of protein and fats, may have a better chance of mitigating against the high cost of living and the possible VAT hike,” the report says.

“It may also have sent a better message to South African households who struggle on low incomes, and who have over the years turned to offal not generally as a preference, except for infrequent purchases, but out of necessity to try to source some type of cheaper protein for their families.

“There is also a question of whether VAT should not be removed from all animal products? That is, VAT be removed off all livestock to release greater demand from a much larger section of our population who want to buy meat but who are constrained by affordability — this step may help consumers, farmers and accelerate economic growth?”

The Association for Dietetics in South Africa (Adsa) recently accused government, the health-care system, the media and high food costs of failing South Africans by placing barriers to healthy living. The association warned unless systems change, the rate of obesity will continue to spiral.

The country has the highest obesity rate among all African countries with half of all adults recorded as overweight or obese — 68% of women and 38% of men. According to the association, this not only affects quality of life for individuals and families, but is a major contributor to South Africa’s preventable disease burden that includes diabetes and hypertension.

Maria van der Merwe, head of Adsa, said when examining the food system and the foods available, affordable and desirable, there’s a prevalence of calorie-dense but nutrient-poor foods accessible and affordable in certain communities.

PMBEJD’s Household Affordability Index tracks the prices of 44 basic foods from 47 supermarkets and 32 butcheries in Johannesburg, Durban, Cape Town, Pietermaritzburg, Mtubatuba in northern KwaZulu-Natal and Springbok in the Northern Cape.

In the household food basket, the additional zero-rated items may include chicken feet, chicken gizzards, chicken livers, beef livers, tripe and baked beans.

According to the report these items cost R526.91, including 15% VAT, in March.

“If these items were to be zero-rated, then their price may be reduced to R458.18 — a potential R68.73 saving ... We do not know if zero-rating the foods as proposed by the minister will be helpful,” the report states.

Half of the foods in the total household food basket are subject to VAT.

“Foods subject to VAT make up 47% of the total cost of the household food basket in March 2025: zero-rated food items cost R2,849.18 and foods subject to VAT cost R2,480.17   — the total household food basket being R5,329.36.

“VAT on the total household food basket came to R323.50 in March 2025. This means 6.1% of the household food basket is made up of VAT.”

According to the report the VAT on basic food is high relative to the amount of money families have available to spend on food.

“VAT on basic foods removes money from the purse that could be spent on more food, better diversity of food and better-quality food. The context of the VAT hike must be seen in the context of a food affordability crisis.”

PMBEJD’s data shows:

• for a household of seven, the total cost of the food basket is R5,329.36. Divide this by seven to get a per person spend of R761.34. This is below the food poverty line of R796;
• for a worker’s family of four, where one worker is employed and earns at the National Minimum Wage level, the data shows a 47.4% shortfall in nutritious food, with less than R490.85 per person available to spend on food;
• for families with children, and relying on the Child Support Grant of R530 per month, the average cost of feeding a child a nutritious diet in March is R951. The Child Support Grant is 33% below the food poverty line of R796 and 44% below the average cost to secure basic nutrition for a child.

“Hiking the VAT rate in this context will only hurt families further and have consequences for our social, health and economic outlook. Hiking the VAT rate was an idea, a proposal — it does not have to be implemented. We do have other options to raise revenue that may be far less harmful to our people, businesses and economic growth.”

It also focused on the looming electricity hike of 12.7%

“This tariff hike may add an additional R115.18 onto workers’ prepaid electricity bills [based on a 350kWh consumption]. This electricity hike will force workers to draw down on their monthly national minimum wage [NMW] increase of R203.28 to pay the higher costs of electricity. From a 4.4% NMW increase, the new electricity tariff will reduce it to an R88.10 per month increase.

“If the proposed 0.5% VAT increase is passed, workers will be even worse off. Every year electricity tariff hikes decimate the annual NMW increases, leaving workers with far less money in their pockets than is fair, but also counterproductive to a strong, healthy, focused workforce — and thereby a much-weakened foundation for economic growth and productivity.”