SA consumers cautioned ahead of VAT, fuel levy increases

Johannesburg - Despite the recent positive sentiments about South Africa’s economy, the challenges facing it remain and the state’s overall fiscus set the tone for a trying budget in 2018.

Ahead of the implementation from April 1 of a number of budgetary pronouncements, consumers are reminded to remain cautious of the tariff hikes. 

Various factors 

Against the backdrop of an uncertain political landscape, a number of factors will continue to pressure consumers.

Ghana Msibi, WesBank’s Executive Head for Sales and Marketing, said: "It would, still, be worthwhile for consumers to be cautious of the VAT increase. A VAT increase of 1% is immediate and while it might seem like a small number, it will add up and affect all purchases from food and clothing, to transport. The total cost of vehicle ownership will definitely be affected and consumers will need to be conscious of how they arrange all spend, not just for automotive purchases."
 
'Small changes', big effects
 
The impending fuel levy increases announced by the finance minister will have broad-ranging consequences. A general fuel levy of 22 cents per litre and a Road Accident Fund levy increase of 30 cents per litre will come into effect from April 4.

These increases will see the general levy and RAF levy increase to R3.37 (7% increase) and R1.93 (18% increase), respectively. "One cannot underestimate the impact of the real cost of the increased taxation on a litre of fuel for those inland and in coastal areas," Msibi reiterated. 

SA car sales to increase? 

WesBank in its prediction at Car of the Year expects new vehicle sales to see moderate growth this year. Dealer sales account for 80% of total sales in South Africa and Msibi predicts passenger car sales through this channel will see especially-aggressive growth this year. 
 
Msibi said: "Assisted by the strengthening of the rand, passenger car sales should increase from 1.1% in 2017 to 3% in 2018.  

"New car sales are further expected to be buoyed by lower new vehicle price inflation and a reduction in interest rates, which will similarly go a long way towards stimulating growth within the segment."
 
Despite the changes due to be effected from April, we remain positive that there are a number of factors that will continue to play in favour of consumers. It, however, remains incumbent on consumers to continue to make informed financial decisions in the face of sustained economic uncertainty.