Electricity or Food: Which essential will SA households sacrifice?
Households cut back on food to pay electricity bills amid proposed VAT hikes and a high unemployment rate.
The rising cost of living in South Africa is a pressing concern, affecting households nationwide. According to Annaline van der Poel, the chief legal officer at Debt Rescue South Africa (DRSA), South Africans are forced to cut back on groceries to keep the lights on.
Speaking to SABC News, Van der Poel revealed that these are the results of a survey conducted by DRSA, a debt counselling service that assists those facing financial hardship.
As South Africa awaits an official announcement on the 0.5 percentage point increase in value-added tax (VAT), Poel expresses a negative outlook for households.
Impact of VAT increase
In his 2025 budget speech, Finance Minister Enoch Godongwana announced that the VAT rate will increase. Under the new tax proposal:
- VAT will increase by 0.5 percentage point on 1 May 2025, making it 15.5%
- A further increase by 0.5 percent point will follow on 1 April 2026, bringing it to 16%.
- The proposal is projected to raise R28 billion in additional revenue in 2025/26.
- A further R14.5 billion is projected to be raised in 2026/27.
Godongwana says the increase is necessary to fund essential services such as healthcare, education, and security and to meet constitutional obligations.
VAT is an indirect tax on the consumption of goods and services. According to the finance minister, “VAT tax affects everyone. The marginal increase to VAT was chosen cautiously, considering its distributional effect and impact. The increase is the most effective way to prevent further spending cuts and to enable us to extend the social wage.”
Reports further state that South Africa’s budget process has been challenging for the first time in 30 years. The African National Congress (ANC), now without a parliamentary majority, has been forced into negotiations. This starkly contrasts previous years when it could pass any policy unchallenged.
As negotiations are still ongoing, a thorough report on the divided Government of National Unity (GNU) and the public backlash is provided by The South African.
The proposed VAT increase is sparking outrage, adding to survey findings by DRSA.
Survey findings
As reported, starting on 1 April 2025, Eskom direct customers experienced a 12.74% rate increase.
“To understand and get an idea of what consumers are going through, we did a survey recently. The survey mainly focused on the effects of the electricity price hikes,” said Van der Poel.
Van der Poel further states that the results are shocking, as consumers are faced with the difficult decision of cutting back on essentials, namely food and transport, to keep their lights on. Some households had to make a tough decision even before the electricity hike.
South Africa is facing significant cost challenges, with a high unemployment rate. Disposable income is shrinking, which is crashing household finances.
Labour market pressures
According to Statistics South Africa (Stats SA):
- South Africa’s official unemployment rate was 32.9% in the forth quarter of 2024.
- The youth unemployment rate was 44.6% in the third quarter of 2024.
- Unemployment increased from 31.1% in the third quarter to 32.9% in the fourth quarter of 2024.
- Youth unemploymented decreased from 45.5% in the third quarter to 44.6% in the forth quarter of 2024.
Stats SA further highlighted a rise in South Africa’s homeless population over the past few decades. This results from the country’s ongoing struggles with inequality and poverty.
Additionally, homelessness among older individuals, particularly those aged 35-39, is primarily caused by economic factors such as unemployment and lack of affordable housing. This accounts for 62.4% of cases.
Despite some relief from decreased fuel prices, the unemployment rate continues to weigh heavily on South African households.
Fuel price decrease, a financial relief?
From 2 April 2025, fuel prices decreased for South Africans. Additionally, The South African provided a thorough report on the fuel price adjustments.
Fluctuating fuel prices often have significant effects on our lives. A decrease in fuel prices could provide some relief to South African households and businesses. This financial relief offers some breathing room as living costs continue to rise.
A recent fuel price drop relieves a burden carried by South African households.
Key highlights
South Africa’s cost of living crises deepens as households face a triple threat:
- A high unemployment rate of 32.1%
- Recent electricity hikes of 12.7%
- Fluctuating fuel costs
- Amidst this, a proposed 0.5 percentage point VAT increase has sparked widespread criticism.
As anticipated, numerous South Africans reject the proposed tax increase. This is due to concerns about its impact on low-income households as well as the economy.
How are you coping with the rising costs of living in South Africa?
Let us know by leaving a comment below, or send a WhatsApp to 060 011 021 1.
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