The cost of mental healthcare in South Africa – and the shortage of providers in the field – means that more and more people with depression and anxiety are battling for help, say experts, who suggest that the country’s VAT policies are contributing to the over-inflation of the price of a therapy session.
“Consequently, the possibility of long-term, sustainable and affordable private psychosocial healthcare recedes, becoming unattainable for most South Africans, especially those most in need of such support,” Dain Peters, a clinical psychologist in private practice, told Moneyweb.
According to the South African Health Review 2025, psychologists are available at just 1.5 per 100 000 nationally in the public sector, with even lower densities in provinces like the Free State (0.9) and Mpumalanga (0.9).
At least 80% of psychiatrists work in the private health sector, with most being based Gauteng and the Western Cape.
In the public sector, psychiatrist density is only 0.38 per 100 000 compared wih 4.98 per 100 000 in the private sector.
Catch-22
Peters said the cost of therapy in SA had become distorted, with the demise of the National Health Reference Price List leading to practitioners resorting to the annual medical aid reimbursement rates as a benchmark for setting fees.
“However, the fact that this benchmark fee is VAT-inclusive suggests the strange situation that the baseline practitioners are using to set their own fees is already inflated by 15%, while neither the institution nor the practitioner might be a VAT vendor.”
Once their turnover exceeds the R1m threshold, they are forced to register as a VAT vendor, leaving them between a rock and a hard place.
They can choose either to lose 15% of their income or raise their fees by 15% to maintain their income with no inflationary increase.
“In theory, if they inflate their private fees by 15% they are unwittingly inflating an already inflated fee,” notes Peters.
The mandatory registration threshold for VAT has not been adjusted for inflation in almost 17 years.
Charles de Wet, VAT expert at ENSafrica, previously noted that if it had been adjusted, the threshold would be closer to R2m. With the inflation target now at 3%, a newly registered company would have to introduce five years of increases in a single year.
Peters says psychologists are incentivised to limit their caseload to shield patients from the higher fees that would inevitably follow if the threshold were exceeded.
“As a result, whether through increased costs or capacity constraint, the outcome is the same: fewer people are seen. This is surely the opposite of what a good public health system is aiming to achieve.”
Finance Minister Enoch Godongwana said last year that there is an incentive for businesses to suppress sales to remain below the threshold.
“The process of adjusting thresholds should be considered holistically and could require further amendments,” he said.
What is the answer?
Peters says the case for VAT reforms in mental healthcare is “compelling”. Possible solutions include amending the VAT threshold or considering VAT exemption for mental healthcare, and healthcare in general.
He cites international precedents where mental healthcare is being recognised as “essential healthcare”. In the UK, Ireland and the Netherlands, health services are VAT-exempt, while psychotherapy services in Poland are being zero-rated.
Peters is collaborating with other advocacy bodies and intends to approach the Health Professions Council of SA and the Department of Small Business Development to engage National Treasury and the South African Revenue Service for VAT exemption on psychological services, and preferably all medical services.
“VAT exemption or zero-rating is proposed as a narrow, administratively coherent reform, capable of reducing systemic distortions, limiting downstream cost escalation, and improving alignment with South Africa’s healthcare policy objectives.”
A recent survey under psychology practices elicited more than 630 responses, with almost 140 practitioners providing detailed written comments.
Many remarked on the fact that they intentionally try to remain under the threshold of R1m because of the increased costs, and the fact that they cannot offset expenses as they are mostly selling time.
This prevents them from seeing more clients, hence they are unable to grow their practices.
Peters says he felt compelled to raise the VAT issue publicly as it eventually felt “too absurd to be ready, willing and able to do the work and then to be unable to do the work, due to bureaucracy, when there is so much need”.
Moneyweb article – Calls for medical and mental health professionals to be VAT-exempt (Open access)
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