Consumer Goods Council calls for urgent expansion of zero-rated foods

The Consumer Goods Council is calling for an urgent expansion of the list of zero-rated food products to ease the cost burden on poor households.

More food items were added to the zero-rated list when there was a Vat increase on the cards, but when the increase was scrapped, the food items were removed.

In response, the Consumer Goods Council of South Africa (CGCSA) addressed the Parliamentary standing committee on finance this week, calling for the National Treasury to urgently reintroduce the expansion of the list of zero-rated basic food items in the draft tax legislation expected to be published soon for public comment.

Neo Momodu, CGCSA executive for legal, regulatory and stakeholder engagement, submitted that in a country facing food insecurity, expanding the list of zero-rated food products, will ensure that poor households are able to afford more healthy and nutritious food that they would otherwise not be able to buy.

She said while the CGCSA welcomed the decision not to increase Vat, this had unfortunately led to the withdrawal of the minister of finance’s decision to expand the basket of Vat zero-rated food items to ease the burden of food costs on the poor and vulnerable.

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Vat zero-rated foods in first and second versions of Budget

In his first and second national budget statement for 2025 the minister proposed expanding the basket of Vat zero-rated food items to include canned beans and peas, dairy liquid blends and certain organ meats (offal) from sheep, pigs, goats and poultry.

However, after the Vat increase reversal statement of 24 April 2025, the National Treasury announced that “the decision not to increase Vat means that the measures to cushion lower income households against the potential negative impact of the rate increase now need to be withdrawn and other expenditure decisions revisited”. 

Momodu said this decision is particularly concerning for the CGCSA and its members because many South Africans are hard hit by the cost of living and the zero-rating of the additional products would have gone a long way to not only cushion consumers but also improve healthy eating and healthy lifestyles, as well as improve food security.

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Scrapping of Vat increase helps, but consumers need more zero-rated items

“Although there is no doubt that the decision to retain the Vat rate at 15% benefits consumers, this ‘win’ for consumers must be properly unpacked. It has merely avoided one of the potential additional direct costs that consumers carry by maintaining the status quo. This ‘win’ did in fact not create any positive means to reduce the existing burdens on financially vulnerable households.

“Maintaining the status quo is simply not enough to provide any tangible difference for vulnerable households or manifest the socio-economic obligations on the government to deliver food security to all consumers, especially protected groups that include women, children and disabled people.

“It would be an unfortunate outcome if the traction gained to expand the list of zero-rated items were to be lost due to seemingly erroneous and misplaced ties between expanding the zero-rated list and further tax increases. These two things are mutually exclusive and each bears interrogation on their own merits,” Momodu said.

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Retailers try to help, but more food must be zero-rated

She pointed out that the CGCSA’s food manufacturer and retail members have and continue to find ways of ensuring that basic food items are sold at competitive prices, aware of the impact of food costs on their consumers, particularly the poor and disadvantaged.

“Therefore, expanding the basket of Vat zero-rated food items would have been beneficial for consumers.”

Momodu said the Treasury should find ways to ease the untenable financial strain that South African consumers, particularly lower income households, face due to the cumulative impact of above inflationary increases in taxes, levies and costs of living generally.