A proposed VAT hike could erode the purchasing power of 2025 SASSA grants, leaving millions of beneficiaries struggling to keep up with inflation.
Millions of South Africans rely on SASSA grants to cover essential expenses, from food to electricity. However, a proposed 0.5% VAT increase in 2025 threatens to reduce the real value of these grants, making it harder for beneficiaries to afford basic necessities. While the government has announced above-inflation increases to core grants, the rising cost of living and food inflation may cancel out these gains.
VAT and Its Ripple Effect on SASSA Grants
The Finance Minister justified the 5.9% increase in grants by acknowledging the impact of the VAT hike. Yet, even a small increase in Value Added Tax (VAT) affects every purchase, from groceries to transportation.
For instance, an Older Person’s Grant recipient (aged 60-74) now receives R2 310 per month. A typical monthly food basket, previously costing R1 500, will now cost around R1 507.50 with the VAT increase. This added expense compounds across other essential goods, resulting in an estimated R30-R40 monthly loss in purchasing power.
The Hidden Cost: How VAT Erodes Household Budgets
Many SASSA grant recipients support entire households, not just themselves. With food inflation often exceeding general inflation, the grant increase may fail to keep pace with rising costs.
- The VAT hike could erase the R130 increase in grants.
- Over a year, this loss could amount to R450-R500, equivalent to a week’s worth of food.
- Child Support Grant beneficiaries are hit hardest, as the small grant increase gets entirely wiped out by VAT-related price hikes.
Will Cabinet Reject the VAT Increase?
The National Treasury’s 0.5% VAT adjustment is still under consideration, with a final decision expected by May 2025. While it may seem minor to salary earners, low-income households will feel the impact immediately. With food inflation rising, electricity prices set to increase in April, and essential goods costing more, a VAT hike could push more families deeper into financial distress.
Final Thoughts
A VAT increase might be necessary for revenue, but its impact on South Africa’s most vulnerable citizens cannot be ignored. With 28 million people depending on SASSA grants, even small price changes affect millions of households. Should the government find alternative ways to generate revenue, or will struggling families bear the burden?
Also read: New VAT-Free Food Items Announced – But Not Everyone Is Impressed
