23 Feb Zero-rated foods do not protect the poor from the negative impact of the VAT increase

by Mervyn Abrahams 

Since the announcement of the increase of VAT from 14% to 15%, many politicians, economists and other ‘experts’ have argued that working class households are protected from the negative impact of the increase in VAT because certain foods are zero-rated. We would have done better to listen to the voices of ordinary women who prepare food for their families to understand the impact of a raised VAT level for working class households.

The underlying assumption of the ‘experts’ is that working class households only eat zero-rated foods.  This assumption is flawed and could be construed as having racist overtones.

PACSA (Pietermaritzburg Agency for Community Social Action) tracks 38 foods on a monthly basis that working class households have identified as the foods that they would buy should they have sufficient money to do so. 20 out of the 38 foods are VATable; and 18 are zero-rated.  Of the total cost of the basket of R3129.84, a 15% VAT component is R221.59.  The total contribution of VAT to the overall PACSA Food Basket is 7.08%.

In order to provide a meal, working class households don’t just use zero-rated foods. A mother does not send her child to school with a few slices of brown bread; she sends her child to school with a sandwich that, in addition to the brown bread, will require margarine, peanut butter, or jam, cheese, polony – these are all subject to VAT.

The same applies to cooking a meal for a family.  Working class households do not only use maize meal, brown bread, dried beans and rice, which are zero-rated. Mothers prepare meals with more than just these zero-rated foods. They also require other foods in order to create a meal. A chicken stew served with maize meal requires salt and spices and chicken. None of which is zero-rated.

All of our basic foods (even the zero-rated foods) require a cooking process to be made into a meal and this requires water and electricity, which are subject to VAT.

Arguing that increasing the VAT rate will have no impact on working class households because certain foods are zero-rated reveals a lack of understanding on what people eat and how meals are put together. There is just no way in which households are able to escape this increase in VAT when it comes to food. The only way in which households can escape the impact of VAT is if all foods are zero-rated.

Mervyn Abrahams is Director of the Southern Africa Food Lab as well as PACSA.