South Africans are reporting rising levels of depression and anxiety. Yet access to care is tightening. High out-of-pocket costs and an entrenched shortage of mental health professionals are leaving many people underserved. In particular, those with the greatest need are most affected.
A recent advocacy document argues that government VAT rules and medical aid pricing behaviour are actively inflating the cost of therapy. Dain Peters, a clinical psychologist in private practice, argues that the result is a market in which long-term, sustainable, and affordable psychosocial care is out of reach for most households.
Public Sector Capacity is Under Severe Strain
The South African Health Review 2025 highlights a critical shortage of psychologists in the public health system. Nationally, there are only 1.5 psychologists per 100,000 people. Provinces such as the Free State and Mpumalanga have even lower densities. As a consequence, public facilities have limited capacity to absorb demand. This pushes more patients towards private options that they often cannot afford.
Psychiatry is also unevenly distributed. About 80% of psychiatrists work in the private sector, concentrated in urban areas of Gauteng and the Western Cape. Psychiatrist density in the public sector is 0.38 per 100,000, compared with 4.98 per 100,000 in the private sector. The numbers underline a structural imbalance: the greatest concentration of specialist care sits where affordability is highest.
Mental Health VAT Reform and the Therapy Price Spiral
Peters argues the price distortion starts with how private fees are benchmarked. Following the abolition of the National Health Reference Price List, many practitioners began using annual medical aid reimbursement rates as a guide for fee setting.
The problem, he says, is that this benchmark already includes VAT. This effectively adds a 15% uplift to the reference price, even when neither the institution nor the practitioner is a VAT vendor.
Once a practice’s turnover exceeds R1 million, VAT registration becomes mandatory. Practitioners then face a choice that can punish both the therapist and the patient. They can either absorb the VAT hit and effectively lose 15% of income, or raise fees by 15% to preserve earnings. Alternatively, raising prices can mean inflating a fee that was already inflated.
Peters also points to the VAT threshold itself. It has not been adjusted for inflation in nearly 17 years**. VAT specialist Charles de Wet previously suggested that an inflation-adjusted threshold would be closer to R2 million. With inflation targets now lower, a newly registered practice may face a step-change in pricing. It can feel like several years of increases landing at once.
Mental Health VAT Reform Could Unlock Access and Capacity
The incentives created by the threshold are central to the access problem. Peters says many psychologists limit caseloads to avoid triggering VAT registration. The intention is to protect patients from sudden price hikes. The outcome is still harmful: fewer people are seen, and practices do not scale.
A recent survey of psychology practices received more than 630 responses, including detailed written feedback from nearly 140 practitioners. Many reported deliberately staying below the R1 million threshold. They cited higher costs and limited ability to offset expenses because they primarily sell time.
Peters says this conflicts with public health goals. He also notes that Finance Minister Enoch Godongwana was quoted as suggesting thresholds can create incentives to suppress sales. Furthermore, he says that adjustments should be considered holistically.
Peters believes the case for Mental Health VAT Reform is compelling. Options include raising the VAT threshold, or introducing VAT exemption or zero-rating for psychological services. He cites international examples where mental healthcare is treated as essential. For instance, the UK, Ireland, and the Netherlands have VAT-exempt health services, and Poland has zero-rated psychotherapy.
He is working with advocacy groups and plans to engage with the HPCSA, the Department of Small Business Development, National Treasury, and SARS. The goal is a narrow, administratively coherent reform. Such reform will reduce distortions, slow downstream cost escalation, and improve access.