Despite the recent positive sentiments about South Africa’s economy, consumers have been cautioned ahead of VAT, Levy increases…
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.
Against the backdrop of an uncertain political landscape, a number of factors will continue to pressure consumers who are – and have ambitions to be – active in the vehicle ownership ecosystem. The national budget foretold GDP growth of about 1.5% in 2018 and higher employment numbers – a view that was echoed by WesBank Group CEO Chris de Kock at the recent 2018 SAGMJ Car of the Year banquet.
“The positive sentiment brought about by the recent political changes is a good place to start and we are confident that this will lead to greater economic investment and improved growth prospects for the country,” said de Kock at the event.
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
Furthermore, 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.
WesBank in its prediction at COTY 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.
“Assisted by the strengthening of the rand, passenger car sales should increase from 1.1% in 2017 to 3% in 2018,” Msibi said. “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.