Tourism and hospitality leaders have emphasised that the proposed value-added tax (VAT) increase, expected on May 1, will require South Africa’s government to take decisive action on key policies identified to drive inbound tourism – including rapid implementation of an electronic travel authorisation (ETA) system.

Industry associations such as FEDHASA have cautioned that the 0.5 percentage point VAT increase – announced by Finance Minister Enoch Godongwana in his March 12 budget speech – in each of the 2025/26 and 2026/27 financial years will force hospitality establishments, restaurants and other suppliers to raise their prices.

“Considering this, we need to see the VAT increase counterbalanced with quick, focused and decisive action to stimulate growth in the tourism and hospitality sectors. What’s clear now is that government has to focus on policies that boost tourism growth. This includes more visa reform and expediting the implementation of ETAs,” FEDHASA Chairperson Rosemary Anderson told Tourism Update.

In his State of the Nation Address in February, President Cyril Ramaphosa said the Department of Home Affairs will launch an ETA system this year, “driven by artificial intelligence and machine learning”, to streamline visa processes.

Marc Wachsberger, CEO and Founder of The Capital Hotels, Apartments & Resorts, said an effectively implemented ETA will potentially resolve several longstanding challenges affecting tourism.

“The ETA is aimed at reducing processing delays, cutting down on opportunities for corruption and offering a smoother travel experience. All of these have been key challenges in the tourism sector for a long time and we’re hoping to finally see some progress in this regard.”

The ETA system would complement other recently introduced visa initiatives such as the Trusted Tour Operator Scheme (TTOS) – aimed at boosting arrivals from China and India – and the remote working visa.

“While the TTOS will boost a specific market segment, our appeal needs to extend across all travel groups. The simplest way to do that is to make our systems work efficiently, and tourists from different markets will flood in naturally, as South Africa is still one of the best and most affordable countries to visit,” Wachsberger pointed out.

Impacts of the VAT increase

Tourvest Destination Management CEO Martin Wiest expressed his view that the small increase will not be a major deterrent for international visitors.

“I’m not convinced that adding a couple of euros onto prices for accommodation will make much of a difference. The problem comes when you’re looking at your forward book: you can’t go back to the customer asking for additional money for bookings that have already been paid,” Wiest said.

In a March 18 memo to its more than 1 100 members, inbound industry association SATSA suggested that tourism businesses review the South African Revenue Service’s guidance document on invoicing, ongoing contracts and forward bookings.

SATSA further advised members to:

• Review existing invoices and contracts for bookings and services extending beyond May 1.
• Adjust accounting systems and point-of-sale processes to reflect the new VAT rate from the effective date.
• Be mindful of pricing and communication with clients regarding VAT adjustments on future invoices.