Poor families have been cutting down on buying proper nutritious food by as much as 26%, and need another R1 062.38 a month to be able to afford it.
The August 2018 Household Affordability Index was compiled by NGO the Pietermaritzburg Economic Justice and Dignity Group. It is in response to the government-commissioned panel of experts’ report on VAT, released last week, in which additional items were recommended for zero-rating. Currently, 19 items are zero-rated for VAT.
The Pietermaritzburg organisation warns that families can no longer afford to eat properly and that no amount of “tinkering around the edges of our economic framework” is going to change this.
It wants all VAT charges to be removed from food in light of the price hikes that have occurred since government increased VAT from 14% to 15% in April.
“If there is a need to recover revenue from food, then it is better if it be recovered off luxury foods, which working class households do not buy and the wealthy do buy,” the organisation’s report found.
“Food is not a commodity. It is better for all of us if we are all able to eat properly and be healthy. Without proper nutrition none of our developmental outcomes will come to fruition. Our education outcomes will continue to be dire, our health sector will continue to collapse as more and more people get sick and – with very little money in the pockets of the majority of South Africans, and child stunting levels at 25% for girl children and at 30% for boy children under the age of five years – we can have no future workforce or political stability, or reasonable economic recovery.”
The VAT panel released its report to Finance Minister Nhlanhla Nene on August 6. It recommended zero-rating white bread, bread flour, cake flour, sanitary products, school uniforms and nappies, including cloth and adult nappies.
The panel also recommended that government should expedite the provision of sanitary products to the poor and ensure that zero-rating did not benefit producers, but rather, accrued to consumers.
Julie Smith, a researcher at the Pietermaritzburg Economic Justice and Dignity Group, said the country faced a crisis of affordability and suggested options that could be explored if VAT remained the same.
“We are saying government must remove VAT completely. However, there are a number of options that should be looked into. The income levels are too low because of the legacy of apartheid and workers must be paid a living wage. The government can also look into how it can increase the old-age and child social grants,” she said.
“Another option is that government should look into how it reduces the cost of goods and services. Transport to work takes a huge percentage of household incomes. Can we have a way of reducing fuel prices and have a public transport system? In South Africa, transport is privately owned.”
The ever-increasing cost of electricity, said Smith, also had a direct impact on poor households. Zero-rated foods still had to be cooked. “Unless the cost of electricity is looked into, people may have food but they cannot cook because they cannot afford electricity.”
Families need R1 062.38 more a month to be able to afford nutritious food.
The index shows that the cost of foods in the household food basket, a basket designed with women living on low incomes, was R3 009.65. But the median wage for black South African households is R3 000.
The difference in cost between the foods which families living on low incomes try to buy each month, and the foods which families would like to buy and should buy to meet their basic nutritional needs, amounts to R1 062.38.
The food that families need to buy to meet basic nutrition costs R4 072.38 a month.The situation is worse for families surviving on the R400 monthly child support grant because it is below the poverty line of R531 per person per month. Also, the child support grant is below the cost of a nutritious diet for a child aged between 10 and 13, which is R569.98.
VAT on the household food basket in August, the index found, was R215.77 – or 7.2% of the total household food basket.
“If white bread and cake flour are zero-rated in line with the panel’s recommendations, the savings on the household food basket would be R40.81 a month (R31.46 on 25 loaves of bread and R9.35 on 10kg of cake flour),” the report found.
“This would bring the cost of the household food basket down to R2 968.84 a month. This amount is almost equivalent to the median wage for a black South African household, and this is just food – not transport or any other critical household expenses.”
REMOVING VAT ‘WON’T SEND ECONOMY INTO ASHES’
Removing VAT from peanut butter, an excellent source of protein and fats on children’s sandwiches, the organisation argues, is not going to send the economy into the ashes.
Neither will subsidising eggs, maas, brown bread and maize meal.
Nor will regulating the retailers and the prices on supermarket shelves.
“We are facing probably our greatest crisis, and we are still unable to conceptualise the problem within the broader political economy and deal with its cause. We cannot deal with our food affordability crisis by limiting analyses to losses to the fiscus and evaluating a few chosen goods and services within such a narrow framework of evaluation,” the report found.
“It is not useful to approach problems in isolation or by using the entry point of analysis as ‘whether we can afford this’ or ‘what will the loss to the fiscus be for us?’.”
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