These SA tech companies will absorb the VAT hike - TechCentral

These SA tech companies will absorb the VAT hike

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Although the vast majority of South Africa’s telecommunications and technology companies will pass on the 1% increase in the value-added tax rate — from 14% to 15% — from 1 April, some are bucking the trend and absorbing the increase on behalf of their clients.

MTN South Africa said last week that it won’t pass on the higher VAT charges to its prepaid customers — although it is hiking some prepaid prices as part of an “overhaul” of the prepaid portfolio.

MTN significantly increased the per-minute charges on certain “legacy” prepaid calling plans, though the company said the increases will only affect a subset of prepaid users and are in no way related to the VAT increase.

Spokeswoman Jacqui O’Sullivan said the price increase was related to a planned overhaul of the company’s prepaid tariff plans, which will be phased in over the coming months.

“Customers making use of prepaid will not see a simple VAT increase on prepaid products,” O’Sullivan said. “Instead, MTN is sticking with the portfolio overhaul roadmap that was planned ahead of the VAT changes. Our post-paid base, which went through this portfolio transformation in 2018, will see a simple 1% VAT increase (on 1 April).”

Hosting company Hetzner, meanwhile, said on Monday that its customers’ hosting fees won’t be affected by the VAT increase. “After weighing up this important issue, Hetzner has decided to absorb the increase in VAT and not pass it onto our customers, keeping our pricing unchanged for as long as we can,” the company said in a statement.

“We don’t believe that the VAT increase is an adequate trigger for a price increase. There are a number of factors we do take into consideration when reviewing our pricing.”

It warned, however, that as global input costs continue to rise, it “might not be able to avoid price adjustments indefinitely”.

“But we prefer to look at price increases tied to improvements in our service. If an adjustment is required in the future, we will carefully consider the value we offer our customers.”


MultiChoice will also not hike prices on 1 April because of the increase in the VAT rate, though its regular annual adjustments will kick in on that date. The price increases were announced prior to government revealing that VAT would be rising on the same date.

The price of DStv Premium, MultiChoice’s top-end bouquet, will rise by 2.5% on 1 April 2018 — from R789/month to R809/month. Mid-tier bouquets, however, will see bigger increases, with DStv Compact Plus (formerly Extra) to rise by 4.1% from R489 to R509/month and DStv Compact going up by 5.5% to R385/month from R365 now. The lower-end DStv Family bouquet will see the biggest price increase — 6% — with the monthly fee rising from R235 to R249/month. DStv Access and EasyView remain unchanged at R99 and R29/month respectively.

Telecommunications provider Switch Telecom, meanwhile, said earlier this month that it has decided to reduce the impact of the VAT hike by effectively reducing its service fees.

“Switch Telecom will be reducing our standard monthly services fees and once-off charges by 1% as of 1 April 2018. Our clients will still pay the same VAT-inclusive rate for both standard monthly service fees and once-off charges.”

Call charges will remain at the same VAT-exclusive amount but will be subject to the new rate of 15%, it said. — (c) 2018 NewsCentral Media

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