The recent increase in Value-Added Tax (VAT) has raised concerns across South Africa’s hospitality establishments serving government clientele. For many years, the National Treasury has capped officials’ spend on domestic accommodation and meals in the effort to manage and contain government spending.

Government recognises FEDHASA (Federated Hospitality Association of South Africa) as the official representative of the hospitality industry in the country, and its CEO, Tshifhiwa Tshivhengwa points out that “Increases in VAT are normally passed on to the consumer. However, there has been unease amongst hotels, including major chains, B&Bs and guesthouses.  They have been facing the prospect of having to absorb the one percent hike in order to compete for, or retain their government clients if there was no corresponding review of the restrictions.”

As part of its mandate to represent its members to government with one united voice, FEDHASA has been involved in on-going engagements with government to not only deal with the VAT issue, but also the impact of the recently introduced Sugar Tax and rising inflation.

Following these discussions FEDHASA can confirm that the National Treasury has published an addendum to its cost containment instruction.  The revisions are between a 2 to 3 percent increase in the maximum allowable government spend on domestic accommodation and meals which will cover the impact of the VAT and the Sugar Tax increases on the industry only. However, Tshivhengwa says this is not sufficient to cover the inflation adjustment that the sector faces. He says, the industry’s input cost has risen by general inflation and the association implores national treasury to consider the full extent of inflation and adjust the maximum capped rate to meet the Consumer Price Index.

“This is a good start for our members and the South African hospitality industry as a whole,” comments Tshivhengwa, “In the interests of ensuring fairness and the sustainability of South Africa’s vital hospitality businesses, FEDHASA will continue this process of lobbying government so that their cost containments also properly take the current inflation rates into account.”