---
title: "VAT hike, trade wars crush SA consumer confidence"
description: "Consumer confidence is at its lowest level in almost two years, an ominous sign for the retail sector and wider economy."
type: "NewsArticle"
publisher: "Daily Maverick"
site: "https://www.dailymaverick.co.za"
section: "SENTIMENT NOSEDIVE"
author: "Ed Stoddard"
author_url: "https://www.dailymaverick.co.za/author/ed-stoddard/"
canonical_url: "https://www.dailymaverick.co.za/article/2025-03-25-vat-hike-trade-wars-crush-sa-consumer-confidence/"
published: "2025-03-25T18:54:57"
updated: "2025-03-25T18:55:00"
lang: "en-ZA"
word_count: 392
---

# VAT hike, trade wars crush SA consumer confidence

> Consumer confidence is at its lowest level in almost two years, an ominous sign for the retail sector and wider economy.

By Ed Stoddard · Published 25 March 2025, 20:54 SAST · Updated 25 March 2025, 20:55 SAST

## Key points
- South African consumer confidence plummeted 14 points into the depths of negativity, as tax woes and trade tensions turned optimism into a distant memory.
- South African consumer confidence plummeted 14 points to -20 in Q1 2025, the lowest since early 2023, driven by tax hike fears and trade tensions.
- The FNB/BER Consumer Confidence Index reflects growing alarm over potential VAT increases and deteriorating US-South Africa relations.
- Despite a strong retail sales start in 2025, the sentiment shift signals a worrying outlook for consumer spending and the economy.
- Economists warn that while spending ability may improve, consumer willingness to spend is likely to decline, posing risks for the retail sector.

## Content

South African consumer confidence crashed deeper into negative territory in the first quarter (Q1) of this year as the Budget VAT spat and Trumpian trade wars smashed a gaping hole in sentiment.

The quarterly FNB/BER Consumer Confidence Index (CCI) shed a steep 14 points, falling to -20 from -6 in Q4 of 2024.

![consumer confidence](https://www.dailymaverick.co.za/wp-content/uploads/2025/03/BM-Ed-CCI-1.jpg)![consumer confidence](https://www.dailymaverick.co.za/wp-content/uploads/2025/03/CCI-Mar25.jpg)

“The fieldwork for the first quarter CCI survey commenced only days after the Finance Minister’s (aborted) proposal to hike VAT by two percentage points came to light (when the 19 February budget speech was postponed),” FNB said in a statement on Tuesday.

“The prospect of significantly higher taxes – either via VAT hikes or further bracket creep on the personal income tax front – likely alarmed many consumers. Even though the March Budget (which took place after the fieldwork ended) softened the VAT hike, it still places a significant tax burden on consumers.”

FNB also noted the souring of diplomatic relations between South Africa and the US and Donald Trump’s trade wars, as well as the return of rolling power cuts, as factors that weighed on sentiment.

“The first quarter reading of -20 is also the lowest CCI reading since the first half of 2023 and signals an alarming deterioration in the outlook for consumer spending following the strong end to 2024,” FNB said.

Consumer spending got off to a brisk start in 2025. Retail trade sales rose a robust 7.0% year on year in January compared with 3.2% in December.

This was partly a reflection of expenditure linked to early pension withdrawals under the two-pot reforms introduced late last year, and it bode well for the retail sector this year.

But consumer confidence has now crumpled and the South African Reserve Bank’s decision to hold interest rates steady last week after three straight 25 basis point cuts will also not help to underpin sentiment.

“While we did not anticipate an improvement in consumer sentiment in Q1 2025, the 14-point decline in the consumer confidence index (CCI) was far greater than we had expected,” said Jee-A van der Linde, senior economist at Oxford Economics Africa.

“While we still believe that consumers’ spending ability will strengthen modestly in 2025, driven by improved economic activity, their willingness to spend may diminish.”

The bottom line is that the reading is an ominous sign for the retail sector and the wider economy. **DM**