Electricity costs soar 165% in a decade, but the fight to remove VAT faces a familiar obstacle
Electricity tariffs have risen sharply in recent years, but National Treasury says scrapping VAT on power bills is not under consideration, leaving households without this potential source of relief.
South African households are facing a significant increase in electricity costs, with tariffs up 165% over the past decade. Despite these hikes, the National Treasury has no plans to remove Value Added Tax (VAT) from electricity purchases, citing the need for a broad VAT base to maintain revenue. Treasury argues that zero-rating electricity would reduce government revenue, as the sector generated approximately R22.21 billion in net VAT revenue during the 2024/25 financial year.
The uMkhonto weSizwe Party (MK) has proposed including electricity in the VAT zero-rated items, arguing that VAT adds to financial pressure on already struggling households. However, the Organisation Undoing Tax Abuse (Outa) has not taken a definitive stance on the matter, suggesting that electricity should be exempt only if it is considered an essential service.
The government currently provides free basic electricity to qualifying indigent households through the Free Basic Electricity program, with R21.6 billion allocated for basic energy in the 2026/27 Budget. However, the adequacy of this allocation is under review, and the Department of Electricity and Energy is examining whether the existing 50kWh monthly allocation remains sufficient to support low-income households.
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