The bitter pill? VAT hike's threat to South Africa's agricultural heart and food security

THE recent tabling of the 2025/26 budget, with its proposed 2% increase in Value Added Tax (VAT) spread over two years, has ignited a firestorm of debate.

- THULASIZWE MKHABELA

While the National Treasury aims to bolster State coffers, the potential repercussions for South Africa's agricultural sector and, critically, our nation's food security warrant serious scrutiny. This VAT hike presents a significant threat that demands careful consideration.

Agriculture, the bedrock of food security and a significant contributor to South Africa's economy, operates on tight margins. Input costs, ranging from fertilisers and pesticides to fuel and machinery, are already substantial and often volatile.

A VAT increase directly inflates these costs. Farmers, particularly small-scale producers vulnerable to price fluctuations and lacking economies of scale, will face increased financial pressure. This could lead to reduced productivity, delayed investments in crucial infrastructure and technology, and potentially even farm closures.

The ripple effects of increased input costs will inevitably reach consumers through higher food prices.

While basic food items are currently VAT-exempt, the increased production, processing, and transportation costs = all subject to VAT - will be factored into the final price. This indirect impact will disproportionately affect low-income households, who already spend a significant portion of their income on food. A seemingly small 1% yearly increasecan translate to a substantial burden on those struggling to put food on the table, exacerbating food insecurity.