Skip to main content

Retailers attempt to keep higher prices from consumers

| Economic factors

Some retailers have started passing the value-added tax (VAT) increase on to their suppliers, while squeezed consumers are beginning to re-arrange their budgets to accommodate the one percentage point VAT hike and a steep rise in the petrol price.

The new VAT rate of 15% came into effect on April 1 and threatens the already weak buying power of South African consumers, who also have to contend with a 72c per litre increase in the petrol price.

Former finance minister Malusi Gigaba announced the VAT increase and the rise in the Road Accident fund levy in the February budget.

Food retailer Choppies said that, in most cases, suppliers had absorbed the costs. "We had to pass on very few price increases to the consumer, which will have little impact on customers," the company said.

Clicks Group CEO David Kneale said the cost of medicines was regulated by the government in terms of the single exit-price mechanism and all prices at Clicks pharmacies were adjusted from April 1.

He said Clicks had "not altered any prices on lines that are … on promotion, which account for close to 35% of sales in Clicks".

"On non-promoted lines, Clicks has not yet moved pricing and will be monitoring competitors," he added.

The new VAT rate has necessitated software changes, which were expected to be fairly uncomplicated. However, some analysts said bigger organisations with multiple stores and suppliers, which had to deal with cross-border stock flows, would find the process more difficult than their smaller peers.

Retailers such as Woolworths have placed signs in their stores informing consumers that the price tag on items of clothing may not be the final amount reflected at the till.

National Credit Commissioner Ebrahim Mohamed said retailers had known about the VAT increase since budget day and were expected to have prepared for it, and visible pricing was required in terms of the Consumer Protection Act.

Professor Ingrid Woolard and a panel of experts will review the list of zero-rated items — which are exempt from VAT — with an initial report expected in June.

First National Bank economist Jason Muscat said analysts expected retail sales to continue growing because of an improvement in credit advancement, despite the VAT increase.

Pin It

Related Articles

Budget: Liquor, cigarettes to cost more, no inc...

By: IOL Finance 2024 Budget made provision to raise R15 billion in taxes to alleviate fiscal pressure and support debt stabilisation.

Retail consumers now seeking value as cost of l...

By: IOL COST-of-living pressures muzzled sales volumes for retailer Spar’s Southern African business, including South Africa, although group turnover, which also accounts for its stores in Switzerland, Ireland and England, was up 9.3% for the fiv...

Excessive heat could result in higher food pric...

By: Given Majola - IOL The excessive heat across South Africa currently is a significant concern for the farming sector, according to the Agricultural Business Chamber (Agbiz).

Budget 2024: South Africans should not expect a...

By:Dhivana Rajgopaul - IOL Amid the budget deficit not moving in the right direction, a tax specialist has said South Africans can expect Finance Minister Enoch Godongwana to raise the price of beer and cigarettes, but being an election year, no ...

Retail sales cool in 2023 with consumers still ...

By: Siphelele Dludla - IOL Consumers in South Africa are expected to continue struggling this year under the brunt of stubbornly high inflation, rising cost of borrowing and weak consumer confidence after retail activity plunged in 2023, in spite...