Proposed 2% VAT Hike to 17% Coupled with Eskom’s 12.7% Tariff Rise Threatens Households and Businesses with Soaring Costs as Government Seeks Revenue Amid Fiscal Strain.
Johannesburg, South Africa – March 3, 2025 – South African consumers are staring down the barrel of a financial double whammy as the government mulls a contentious 2% increase in value-added tax (VAT)—pushing it from 15% to 17%—while Eskom’s recently approved 12.7% electricity tariff hike looms just weeks away. The dual blows, set to take effect on April 1, could see monthly electricity bills for an average household consuming 350 kWh surge by over R250, with broader price hikes rippling through the economy. As fiscal pressures mount and coalition politics falter, the proposals have sparked outrage among citizens already grappling with a 33.5% unemployment rate and sluggish 0.6% economic growth.
The National Treasury floated the VAT increase in late February as a lifeline to plug a R22.3 billion budget deficit, exacerbated by rising public sector wage demands and infrastructure commitments. Finance Minister Enoch Godongwana, facing a postponed budget speech now slated for March 12, has pitched the hike as a necessary evil to avoid deeper cuts to social services or a reliance on volatile corporate taxes. “VAT is broad-based and efficient,” Treasury argued in a statement, noting that higher-income households, which account for over 75% of VAT revenue, would bear the brunt. Yet, for the working class and poor, the reality is bleaker: every rand spent on essentials—electricity, food, transport—will stretch thinner.
Eskom’s tariff increase, greenlit by the National Energy Regulator of South Africa (Nersa) in January, adds fuel to the fire. Starting April 1, the state utility’s 12.7% hike will lift the cost per kilowatt-hour for residential users, with municipalities expected to pass on even steeper increases—some as high as 15%—to cover their own rising costs. For a typical prepaid household using 350 kWh monthly, the bill could jump from R1,042 to R1,195, factoring in the VAT increase South Africa electricity consumers now face. Businesses, too, are sounding the alarm, with small enterprises warning of layoffs and price hikes that could stifle an already fragile recovery.
Public reaction has been swift and scathing. “We’re being squeezed dry,” said Thandi Mokoena, a Soweto shop owner who relies on prepaid electricity to keep her business afloat. “First load-shedding, now this—how are we supposed to survive?” Cosatu, a key ally in the ANC-led Government of National Unity, has fiercely opposed the VAT hike, demanding protections like zero-rating more food items and bolstering social grants. The Democratic Alliance, another coalition partner, has threatened to derail the plan, forcing last-minute negotiations that delayed the budget reveal.
Economists warn of a domino effect. “A 2% VAT rise could push inflation toward 6%,” said Gina Schoeman of CitiBank South Africa. “Add Eskom’s increase, and you’re looking at a cost-of-living crisis for the poorest, who spend disproportionately on basics.” The South African Reserve Bank, already battling inflation at 4.4%, may respond with tighter monetary policy, further dampening growth prospects. Meanwhile, Eskom defends its tariff adjustment as a step toward “cost-reflective pricing,” citing years of underfunding and a R78 billion government bailout in 2024.
The political stakes are high. With the ANC’s 40% showing in last year’s election still stinging, critics see the twin increases as a self-inflicted wound ahead of the 2026 local government elections. Posts on X reflect a growing disillusionment, with users decrying everything from Stage 6 load-shedding’s return to medication shortages at clinics. “They’re decampaigning themselves,” one user quipped, echoing a sentiment that the government’s fiscal fixes may cost it dearly at the polls.
For now, South Africans await the March 12 budget with bated breath. Treasury hints at concessions—perhaps expanding zero-rated goods or rolling out targeted relief—but the specter of higher VAT and electricity costs looms large. As dusk falls over Johannesburg, the hum of prepaid meters serves as a stark reminder: relief may be in short supply, but the bills keep coming.
