25-04-2025
#NoVAT: Expert says shoppers should still be mindful of their spending habits
The National Treasury has announced the reversal of the 0.5 percent VAT increase.
Reports show that South Africans are still struggling with their monthly repayments.
An expert advises shoppers to avoid impulse spending and those 'you qualify for' messages.
South Africans across the country have breathed a sigh of relief.
This comes after the announcement that the VAT increase from 15 to 15.5 percent, set to be in effect from 1 May 2025, will be abandoned.
In a statement, the National Treasury explained that 'The decision to forgo the increase follows extensive consultations with political parties, and careful consideration of the recommendations of the parliamentary committees.'
The government motivated the initial VAT increase to help with funding public services and cushion low-income households, but the cost of living crisis would still be a major issue with many South Africans struggling to make ends meet even without the increase.
South Africans are still struggling with monthly repayments
While the reversal of the VAT increase offers a sense of victory, 'Consumers are not out of the woods, far from it,' Salem Dyafta, the consumer financial education specialist for group brand and marketing at Momentum, tells TRUELOVE.
'We tend to want our spending to keep up with whatever is currently happening, whether it is interest rate decrease, salary increase (lifestyle inflation), or any changes that seem to want to suggest that we have wiggle room in our pockets.
'Reports (Credit Bureau Monitor) are showing us that a large number of SA consumers are still struggling with monthly obligation repayments. 10.19 million consumers have impaired credit records showing in the Credit Bureaus. This indicates that, even without the VAT increase, we still need to thread carefully around our spending decisions.'
Shoppers need to be mindful of their spending
Even without the VAT increase, shoppers still need to carefully budget and be mindful of their spending habits to keep themselves prepared for any tricks the government might have up their sleeves.
Salem says, 'Small, daily financial decisions like whether to eat at home or get take aways, making purchases with no budget in place (impulsive spending) to significant decisions like responding to that 'you qualify for' message all add up and can send us into a negative financial trap.
'Consumers already turn to credit cards and personal loans to cover day to day needs – in other words – we are borrowing to eat, borrowing to make it to the end of the month. Being mindful of the cost-of-living crisis is not enough, we need to be intentional and move from 'every cent counts' to 'account for every cent''
Salem shares that calling on a financial advisor is the new form of 'self-care', and that should be one expense many should investigate.
'[South African] consumers are in a pressure pot, so we need to be prepared for change – always. Financially prepared that is! We need to have plans to constantly adjust our budgets for when things change… when things get tough, because they do get tough and because we are caught sleeping, we find ourselves having to accommodate changes by borrowing,' Salem tells us.
'If we 're going to win at the finances game, we need to address our financial behaviours. Decisions like what to buy, how to buy it are either moving us forward or plunging us into debt traps. Small, daily decisions contribute to our financial behaviours.'
