By Simanga Gamedze | 2025-03-13

FOLLOWING the announcement by South Africa to increase Value Added Tax (VAT) by 0.5 per cent in 2025/26 and 0.5 per cent in 2026/27, pushing it to 16 per cent, Minister of Finance Neal Rijkenberg says they are yet to consult with Cabinet on when Eswatini can follow suit.

According to the minister, they will take the proposal to Cabinet. Rijkenberg said if it is approved, the ministry would then approach Parliament for Eswatini to increase VAT in line with South Africa.

He said government was relieved that South Africa did not hike VAT by the initial two per cent as it would have had a huge impact in household expenditure. Rijkenberg had previously indicated that if South Africa as Eswatini number one trade partner would increase its VAT, Eswatini would follow suit.
He explained that Eswatini’s VAT rate was directly tied to that of its larger neighbour due to economic interdependence.

“Differing VAT rates across our borders, where 70 per cent of our trade takes place, would cause chaos. So, even though we are not planning to increase VAT at the moment, if South Africa does, we will unfortunately need to follow,” he said.
The minister acknowledged that such a tax hike would have serious implications for Emaswati, who are already struggling with rising living costs.

However, he emphasised that the decision was not entirely within government’s control. “Our government will wait for South Africa’s final decision. But if they increase VAT, we will not have a choice,” he added.
South Africa’s VAT system has evolved significantly over the years. In 1978, a General Sales Tax (GST) was introduced at four per cent, increasing to 12 per cent by 1985. In 1991, GST was replaced by VAT at an initial rate of 10 per cent, which was later raised to 14 per cent in 1993.

To cushion the poor, essential food items and paraffin were exempted from VAT.
The most recent VAT hike occurred in 2018 when the rate was increased from 14 per cent to 15 per cent.
Economist Sanele Sibiya explained that South Africa’s VAT increase was justifiable due to the country’s rising debt, which required alternative financing methods to avoid further borrowing.

He noted that South African President Cyril Ramaphosa has already taken measures such as withholding civil servants’ salary increases, while the cost of living remains high.
Sibiya warned that a similar VAT increase in Eswatini would put additional strain on already struggling households. “If the VAT increase passes, it will be inflationary, leading to higher commodity prices. We are already facing immense pressure from the high cost of living, and households are feeling the impact,” he said.

He predicted that if the proposal is approved, there will be intense negotiations between labour unions and government, as workers seek wage adjustments to cope with rising expenses.
“There will be pressure from both sides’ producers trying to pass on costs and consumers struggling to afford goods,” he added.
Sibiya also expressed concern that while the elderly grant increase was expected to provide some relief, its benefits may be overshadowed by the additional financial burden caused by a VAT hike.

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