<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/02/GettyImages-1203445163-820x547.jpeg" alt="" class="wp-image-397795" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/02/GettyImages-1203445163-820x547.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2021/02/GettyImages-1203445163-300x200.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/02/GettyImages-1203445163-768x512.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2021/02/GettyImages-1203445163-1536x1024.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2021/02/GettyImages-1203445163-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>Tito Mboweni, South Africa&#8217;s finance minister, speaks during a news conference before he presents his budget to parliament in Cape Town, South Africa, on Wednesday, Feb. 26, 2020. |Dwayne Senior/Bloomberg via Getty Images</figcaption></figure>



South African Finance Minister Tito Mboweni will deliver the country’s 2021 budget on Thursday, with the country facing <a href="https://www.cnbcafrica.com/2020/south-africa-imf-bailout-hopes-falter-as-zuma-loyalists-resist/">ever-increasing fiscal pressures</a> in the wake of the coronavirus pandemic.



South Africa’s economy enjoyed a strong final quarter of 2020 based on hard activity data thus far, and the IMF expects a modest rebound of 3% in real GDP in 2021 following last year’s 8% contraction.



However, the pace of recovery has been hampered by renewed lockdown measures which have seen the country seemingly quash a second wave of Covid-19 cases.



South Africa was blighted by a new, highly transmissible strain of the virus towards the end of 2020, and recently delayed its rollout of the AstraZeneca-University of Oxford vaccine amid concerns that it exhibits limited effectiveness against that particular strain, known formally as the B.1.351 mutation.



As of Wednesday, the country’s seven-day average of daily new infections sat at just above 2,000, having topped 19,000 in mid-January, according to data compiled by Johns Hopkins University.



Figures from Stats SA on Wednesday showed retail sales contracted by 0.8% year-on-year in December, a much smaller decline than expected, following a 4% drop in November. Industrial output unexpectedly rose by 1.8% annually after a 4.1% drop in November. Mining and manufacturing both climbed year-on-year for the first time since the onset of the pandemic.



Virag Forizs, emerging markets economist at Capital Economics, said the figures indicate that the South African economy likely avoided a double-dip recession to expand by between 1% and 1.5% quarter-on-quarter.



<h2 class="wp-block-heading">‘Harsh fiscal austerity’</h2>



However, she suggested that the containment measures imposed to combat the second wave of the pandemic would weigh on activity for the first quarter of 2021, along with continued power cuts due to long-standing challenges at&nbsp;<a href="https://www.cnbc.com/2019/10/10/south-africas-economy-struggles-as-world-bank-downgrades-forecast.html">debt-laden state-owned utility Eskom.</a>



“Looking ahead, we think that the recovery will remain sluggish. The government’s vaccination campaign is facing serious hurdles, electricity problems will probably not subside any time soon and harsh fiscal austerity will keep demand subdued,” Forizs said in a note Wednesday, projecting that GDP is likely to remain around 2% below its pre-virus path by 2022.



Although the country appears to be through the second wave and the government has begun to ease restrictions since the beginning of February, public finances and the measures taken to rein them in will continue to be a key focus of Thursday’s budget.



Ratings agency Moody’s has South Africa on a negative outlook and has signaled that it is “more likely” to see a further sovereign credit rating downgrade this year,&nbsp;<a href="https://www.cnbc.com/2020/03/31/south-africa-looks-to-structural-reform-last-investment-grade-credit-rating-falls.html">following two downgrades in 2020</a>.



It also forecast that the country’s debt-to-GDP ratio will hit 100.7% during the 2021/22 fiscal year, claiming the country’s credit profile is “constrained by strong, widespread fiscal pressures, including rising borrowing costs and persistently low growth.”



Government revenues came in much higher than expected in December, rising by 10% year-on-year to 176.4 billion South African rand ($12.1 billion), but cumulative fiscal revenues for the first three quarters had fallen by 10.1% year-on-year.



Higher commodity prices and a general rise in global risk-on sentiment have boosted interest in South African assets, with local authorities hoping the incline in commodity prices may help in cutting some of the budget shortfalls, according to Pieter du Preez, senior economist at NKC African Economics.



<h2 class="wp-block-heading">‘Most important’ budget yet</h2>



Considering the already&nbsp;<a href="https://www.cnbc.com/2020/06/24/south-africa-budget-deficit-debt-seen-widening-as-virus-hits-economy.html">brittle state of the economy prior</a>&nbsp;to the pandemic and events since, du Preez suggested that Mboweni’s budget on Thursday will be “the most important one yet.”



“Fiscal stimulus measures to support the economy amid the Covid-19 pandemic, together with the loss in government revenue, have exacerbated the problems for the Treasury,” du Preez said in a note last week.



He added that speculation has arisen over the past month that the cash-strapped government is weighing up numerous tax measures to plug the hole in its 2021/22 budget.



“One of the crucial expenditures for the coming fiscal year will be the R24bn vaccine rollout programme announced by government to inoculate two-thirds of the population – a figure which is needed to achieve herd immunity – by year-end,” du Preez said.



“Bearing in mind the latest positive data, we would not expect the Treasury to increase the tax burden on consumers and corporates given the current climate and the already high tax-burden South Africans face compared to other emerging market countries.”

South Africa’s Finance Minister Mboweni’s Tough South African Budget Task

South Africa readies ‘most important’ budget yet as recovery hangs in the balance

By Lucie Villa, Moody’s Vice President – Senior Credit Officer



On 26 February, the Government of South Africa (Baa3 negative) released its <a href="https://www.cnbcafrica.com/insights/budget-day/2020/02/26/budget2020-sas-finance-minister-tito-mbowenis-full-speech/">budget </a>for fiscal 2020 (year ending 31 March 2021) and for the subsequent two fiscal years. The fiscal trajectory under the new budget is broadly similar to the Medium-Term Budget Policy Statement (MTBPS) presented in October 2019. In the budget, the government has acknowledged that weak economic growth will weigh on revenue intake, which the government has attempted to compensate for by containing spending, particularly on the public sector wage bill. However, it avoided introducing any broad tax-increasing measures given the weak growth environment. As a result, fiscal deficits will remain wide, around 6%-7% of GDP in the next few years, which will increase the government&#8217;s debt burden over the budget period. Moreover, uncertainty regarding the success of negotiations with the country&#8217;s unions to reduce the wage bill and potential contingent liabilities from state-owned enterprises (SOEs) mean risks to budget forecasts are elevated. For fiscal year 2020 (the year ending March 2021), the main budget1 balance – the relevant fiscal metric to infer developments in government debt – is unchanged from the MTBPS at 6.8% of GDP. For the overall budget – which is broader – the government plans an overall deficit of 6.8% of GDP, which is higher than the 6.5% presented in the MTBPS. The revision stems from the social security funds balance, which is now recording a deficit equivalent to 0.2% of GDP, from a surplus of 0.1% in the MTBPS, because of legislative changes to the Unemployment Insurance Fund. This deficit will not weigh on the government&#8217;s borrowing needs because it will not be financed with debt.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="493" height="285" src="https://www.cnbcafrica.com/wp-content/uploads/2020/02/moody.jpg" alt="" class="wp-image-361400" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2020/02/moody.jpg 493w, https://cms.cnbcafrica.com/wp-content/uploads/2020/02/moody-300x173.jpg 300w" sizes="auto, (max-width: 493px) 100vw, 493px" /></figure>



The government has reduced its revenue forecasts to 29.2% of GDP in fiscal year 2020 from 29.3% in the MTBPS and estimates of 29.4% in fiscal year 2019. Expected gains from the carbon tax will offset the revenue loss from above-inflation increase in personal income tax brackets. The government has focused on adjustments to primary spending to compensate for this drop in revenue. Its focus will be the public sector wage bill, where it expects to realize savings of R36 billion (0.7% of GDP) compared with the MTBPS in fiscal year 2020. This would more than offset increases in support to SOEs compared with the MTBPS, especially support to South African Airways. 



However, interest expenses will consume an increasing share of revenue at a projected 14.5% in fiscal year 2020, up from 13.5% in fiscal year 2019. Total spending as a proportion of GDP is higher than in the MTBPS (36.0% vs. 35.8% of GDP) and higher than in fiscal year 2019 because of the slower than previously expected nominal growth and higher interest spending. In subsequent years, the government projects stable revenue, at 29.2% of GDP, which we view as achievable. The budget details further the South Africa Revenue Service&#8217;s efforts to improve tax compliance but does not quantify the expected impact of such efforts. Fiscal adjustments will predominantly come from the continued moderation in the wage bill growth, at a Compound Annual Growth Rate of 3.5%, compared with annual inflation of around 4.5% and average nominal GDP growth of 5.9% over the period. The authorities have yet to negotiate any moderation in wages with the country&#8217;s unions, which will likely be challenging given South Africa’s socioeconomic realities and would represent a significant departure from the outcome of previous negotiations. If the government fails to contain the rise in the wage bill and compensation spending increases in line with the MTBPS, we estimate that the fiscal deficit would reach 7.5% of GDP in fiscal year 2020 and 7.1% in fiscal year 2021. The SOE sector, which has been a main source of unexpected spending in recent years, increases the risk of a wider-than-expected deficit. Even if the government achieves its planned spending restraint, the government&#8217;s projected primary deficit of 1.1% of GDP by fiscal 2022 would still be too wide to stabilize the debt burden given weak growth projections and our expectation of a further rise in the interest bill. The budget projects government debt will reach 71.6% of GDP by end of March 2023 (net of the guarantee to SOE debt that we have included in government debt since fiscal 2019), 10 percentage points higher than the level estimated for end March 2020. Risks remain skewed toward a higher debt path given the challenges in containing spending growth and persistent risks to growth.

Moody’s rates SA’s #Budget2020, warns risks remain skewed toward a higher debt path

JOHANNESBURG (Reuters) &#8211; South Africa’s largest trade union federation COSATU said on Wednesday that it would not allow workers’ wages to be slashed, after Finance Minister Tito Mboweni used a budget speech to promise cuts to the public sector wage bill.



COSATU said in a statement that it was deeply angered by Mboweni’s budget, calling it “provocative” and “reckless”.



Reporting by Alexander Winning; Editing by Catherine Evans

Empty Wallet

SA trade union COSATU says it won’t allow workers’ wages to be slashed

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#Budget2020: Rating SA’s Budget 2020, has it done enough to avoid a downgrade?

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#Budget2020: Expert analysis of finmin Mboweni’s 2020 Budget Speech

#Budget2020: SA’s Budget analysed

#Budget2020: SA finmin Mboweni delivers his 2020 Budget Speech (full speech)

By Kopano Gumbi, CNBC Africa markets reporter 



Minister of Finance Tito Mboweni has decided to cut the strained South African consumer some slack this year by keeping taxes largely unchanged. 



READ:<a href="https://www.cnbcafrica.com/insights/budget-day/2020/02/26/budget2020-risk-of-sa-remaining-investment-grade-by-moodys-has-become-more-pronounced/">#Budget2020: Risk of SA remaining investment grade by Moody’s has become more pronounced</a>







Government will not raise additional revenue from tax
proposals this financial year.&nbsp; The R63 billion revenue shortfall, the
widest shortfall in a decade, is expected to be covered through the management
and consistent decrease of the public-sector wage bill.



“In this difficult economic time, it would be foolhardy to introduce a hike in VAT rates,” said Mboweni.



 <a href="https://www.cnbcafrica.com/insights/budget-day/2020/02/26/budget2020-sas-finance-minister-tito-mbowenis-full-speech/">READ:#Budget2020: SA’s Finance Minister Tito Mboweni’s full speech</a> 



This first budget tabled in the 6th administration has come at a difficult time. With economic activity grinding to a halt, the minister is stuck between al rock and a hard place. Real GDP growth is estimated to be a measly 0.3 percent for 2019 and the projections for 2020 and beyond remain bleak, barely crossing 1 percent. Tax collection revenue was again below expectations, and industry estimated that power cuts caused losses of about 0.1 per cent of GDP in the fourth quarter of 2019.



Ratings agency Moody’s, the last agency to keep South Africa
above investment grade, recently announced it was revising down South Africa’s
2020 growth forecast to 0.7 percent. National treasury estimates that 2020 real
GDP growth will be 0.9 percent. 



The risk to South Africa keeping its investment-grade credit ratings has become more pronounced. The government has noted a sharp increase in borrowing requirements as the fiscal position worsens, and all things being equal, the debt requirement will reach nearly R500 billion in two years’ time. 



It is within this context that the government will not raise
additional revenue from personal income taxes for this year. Choosing instead
to reduce the public-sector wage bill by R160 billion and committing to
spending the already limited resources more prudently. A move that may delight
concerned citizens but aggravate unions that have already expressed displeasure
with the proposal to reduce public sector wages. 



“Eventually government and public service workers will find
each other somewhere along the way, but for the credibility of our fiscal
stance that R160 billion has to be found for all our sakes,” said Mboweni.



The Minister further explained that macroeconomic policy would indicate that a rate cut would have been warranted to spur economic growth. The corporate tax rate remains unchanged at 28 percent and excise duties will be going up in line with inflation and Mboweni hinted that a corporate rate cut could be on the cards if the government can get its ducks in a row.

#Budget2020: South Africans get a tax break; public-sector wage bill cut

By Kopano Gumbi, CNBC Africa markets reporter 



The national treasury has acknowledged that the risk to South Africa remaining investment grade has become more pronounced. A sharp increase in borrowing requirements, unstable electricity supply and reduced tax revenue collections have put strain on the nation’s fiscal position. 



<a href="https://www.cnbcafrica.com/insights/budget-day/2020/02/26/budget2020-sas-finance-minister-tito-mbowenis-full-speech/">READ:#Budget2020: SA’s Finance Minister Tito Mboweni’s full speech</a>



In the last year alone, the government’s gross borrowing
requirements increased by 21.4 percent to R407 billion. The government’s debt
requirements over the next two years will reach nearly R500 billion. The debt
to GDP ratio continues to rise, it is expected to be 65.6 percent of GDP by the
end of 2020/21.



“Although our budget deficit rises to 6.8 percent, we are nevertheless determined to bring it back,” asserts Mboweni.



READ:<a href="https://www.cnbcafrica.com/article/2020/02/26/budget2020-south-africans-get-a-tax-break-public-sector-wage-bill-cut/">#Budget2020: South Africans get a tax break; public-sector wage bill cut</a>



The majority of South Africa’s debt is through domestic loans but as the national treasury has stated, debt is not expected to stabilise over the medium term. A change in the country’s sovereign rating to sub-investment grade would lead to short-term volatility in the financial markets, including an increase in borrowing costs and exchange rate depreciation. The government is of the view that this would unlikely affect its ability to finance its medium-term borrowing requirements.



In trying to exercise more financial prudence, the
government would need to demonstrate that it has a handle on its state-owned
entities. According to government, it has allocated R162 billion to aid
financially stressed companies over the last 12 years. SAA, SA Express, SABC,
Denel and Eskom have been the biggest drain on the state’s resources. Eskom,
the embattled power utility, has received the lion’s share of this assistance.
The total debt of these entities amounts to R760 billion, with 62 percent
guaranteed by government. 



“Over the next three years, debt repayments total R178.1 billion,
of which R103.5 billion is held by Eskom,” estimates government. 



In the coming financial year, government has committed to
provide SAA with an additional R16 billion bailout over the medium term, even
though the company is in voluntary business rescue.



Eskom, which has debt of R450 billion, has received hundreds
of billions from the government and many proposals have been put forward to
assist the ailing power utility. Including, most recently, a proposal to use
the Public Investment Corporation as an investment vehicle. 



Minister Mboweni didn’t scoff at the idea of using public
funds to pay off a large portion of Eskom’s debt, saying that it was not a bad
idea.



“We must be clear that it’s not only public-sector pensions that will be used,” Mboweni said in an address ahead of the budget speech. “If we are going to use pensions, it must be all of our pensions.” This would include private pension funds. The minister outlined that discussions around this are developing and that role-players, in government and in the unions, are coming around to the idea. Mboweni said that this would now introduce the idea that public sector investment could start to happen in Eskom, a point that has been highly contested.

#Budget2020: Risk of SA remaining investment grade by Moody’s has become more pronounced

#Budget2020: SA’s Finance Minister Tito Mboweni’s full speech

Post #MTBPS2019 analysis: Markets react to finmin Mboweni’s #midtermbudget speech

By Kopano Gumbi, CNBC Africa reporter 



State-owned entities are on the chopping block. The minister of finance, Tito Mboweni says the state will be selling some assets and that discussions are underway to re-evaluate the countries portfolio.



READ: <a href="https://www.cnbcafrica.com/zdnl-mc/2019/10/30/sa-mtbps2019-finance-minister-tito-mbowenis-full-speech/">SA #MTBPS2019: Finance Minister Tito Mboweni’s full speech</a>



“We have an agreement that we are selling assets but we won’t tell you which ones,” said the minister ahead of his medium-term budget policy statement. He says the government has between now and the budget speech of February 2020 to negotiate which assets will have to be let go. The minister said South Africa needs to have a serious conversation, with no grand standing, if it is to get back on the growth path.



READ: <a href="https://www.cnbcafrica.com/news/financial/2019/10/30/mtbps2019-low-growth-high-spend-continues-to-plague-sa-economy-but-saa-eskom-get-more-funds/">#MTBPS2019: Low growth, high spend continues to plague SA economy, but SAA, Eskom get more funds</a>



The country currently has a tax collection
shortfall of R53 billion and a widening budget deficit. In addition, South
Africa is struggling with a runaway debt-to-GDP ratio, which the minister
called unsustainably high. Releasing some assets would inject some much needed
liquidity into the state’s budget and relieve the burden of constantly bailing
out unsuccessful state owned companies.



“Maybe the time has come to consider
closing or selling SA Express,” said the minister, “it may be an interesting
case study, if in future you want to close something else.” SAA and SA Express
have been struggling to remain a going concern. The airline requires R21 billion
in order to stay in the sky but the government is only willing to extend R5.5
billion to SAA and R300 million to SA Express. 



Public expenditure needs to be reduced by
R250 billion a year in order to bring down the countries debt-to-GDP ratio to
an acceptable level, the minister advised. &nbsp;But the minister admits that getting to this
point would require very decisive actions.

SA #MTBPS2019: We are selling assets Finance Minister Tito Mboweni declares

By Kopano Gumbi, reporter at CNBC Africa 



In his inaugural medium-term budget policy statement, Minister of Finance Tito Mboweni had the difficult task of explaining to South Africans and the broader investment community how each one of the levers&#8211; save, spend and grow&#8211; would be pulled, and in what ratio, to arrest fiscal wastage, reignite economic growth, stave off a sovereign downgrade and improve the lives of 56 million South <a>Africans</a>. 



READ:<a href="https://www.cnbcafrica.com/zdnl-mc/2019/10/30/sa-mtbps2019-finance-minister-tito-mbowenis-full-speech/">SA #MTBPS2019: Finance Minister Tito Mboweni’s full speech</a>



The South African economy has struggled to recover after over a decade of low and jobless growth. The downward spiral, partly initiated by the global financial crisis, was exacerbated by a failure to implement structural reforms, policy uncertainty and wide spread looting. GDP growth since 2010 has averaged at 1.8 percent. Lagging far behind continental peers of similar market sizes and economic activity. South Africa’s debt-to-GDP ratio is currently at an unsustainably high, 56.7 percent, with outlooks estimating up to 80 percent in the next decade, if nothing changes. 



READ:<a href="https://www.cnbcafrica.com/news/financial/2019/10/30/mtbps2019-low-growth-high-spend-continues-to-plague-sa-economy-but-saa-eskom-get-more-funds/">#MTBPS2019: Low growth, high spend continues to plague SA economy, but SAA, Eskom get more funds</a>



“Our
problem is that we spend more than we earn. It is as simple as that,” said the
minister, while delivering his speech in parliament. And while he tried to
assure the public that this bad habit would soon be kicked, the government
finds itself in the not so simple situation of needing to save, spend and grow
the economy.



GDP growth has been revised down for the year
to 0.5 percent. In February this year growth was forecast at 1.5 percent but
was later revised down to 0.6 percent. Unemployment is at the highest it has
been in over 10 years, currently at 29.1 percent. In this MTBPS, the government
acknowledges that there is little chance that the 9.4 million unemployed adults
will find a job. 



Tax revenue collection continued to be constrained. The government expects a collection shortfall of R53 billion this year and R84 billion next year. The majority of tax, 38 percent, is collected from personal income taxes, 16.7% from company taxes and just over a quarter from Value-Added Tax. 



“We
must also wean state-owned companies off the national budget. They must learn
to stand on their own feet,” said Mboweni during his speech. Currently this is
easier said than done. The state has committed to spend an additional R60
billion this year to make sure delinquent state-owned entities remain going
concerns. 



Power
utility Eskom, is seen as the biggest risk to the South African economy and
will receive an extra R26 billion in this financial year. &nbsp;This is in addition to the R23 billion it
received at the beginning of the year. Smaller state-owned entities will
receive R11 billion and R450 million will be given to support an increase in
student housing. On top of that, the National Prosecuting Authority will receive
R1.3 billion to continue its work, including prosecuting state capture crimes.
And the South Africa Revenue Services will receive R1 billion over two years. 



Another state-owned entity which has failed to
take off is struggling airline South African Airways and its subsidiary SA
Express. The companies are currently discussing the possibility of a merger as
well as equity buyouts from the private sector. 



“We have essentially chosen to subsidise the
middle class and wealthy flying around the country and other parts of the
world,” said Mboweni, “rather than the ordinary workers who sit in old trains
from the townships every day, often getting stuck and being late for work.” The
minister has been clear in that he doesn’t see the value of having a state-controlled
airline, and yet the national carrier will receive R5.5 billion in a bailout
this year. 



Savings efforts have been muted, the minister says
that efforts to reduce spend and save have not materialised. Stricter measures
around cabinet and provincial executive salaries have been proposed, as well as
the controversial e-Toll system remaining as an additional revenue collection
stream.



Whether
the minister’s stern words will be enough to stave off a sovereign downgrade,
remains to be seen.&nbsp; Moody’s is the last
of the international ratings agencies to keep South Africa at investment grade.
They are expected to release a note on our ratings on November 1, 2019. 



“We
shall return to this House next February with the nation’s beloved Aloe Ferox
plant having flourished and show a government at work,” said the minister in
closing. 



<hr class="wp-block-separator"/>

#MTBPS2019: Low growth, high spend continues to plague SA economy, but SAA, Eskom get more funds

By Bryden Morton, B.Com (Hons) Economics, Executive Director and Chris Blair, B.Sc Chem. Eng., MBA – Leadership &amp; Sustainability,  CEO. 



Minister Mboweni opened the 2019/2020
South African budget speech by bringing along a typical South African plant, the
Aloe, and painting a picture of how this Aloe came to be. He said that we must
sow the seeds of renewal and growth, cultivate the soil and protect the plant
from the elements and pests by pruning away the rot. Although used as a
metaphor, the metaphor is clearly referring to stopping corruption and state
capture efforts – something that has directly affected You in South Africa



The budget speech was dominated by concerns
over South Africa’s rising debt to gross domestic product (GDP) ratio, as well
as the poor financial state of a number of state owned entities. These issues provide
a conundrum for the Finance Minister as he would need to seek additional funding
from an already strained tax base. In an election year, major changes to the
tax structure tend to be put off until after the election has passed. The
entire budget speech lived up to the expectation that no drastic changes would
be implemented (from a tax point of view) and that it would be a somewhat
neutral budget &#8211; the main points impacting You in the economy include:



<ul class="wp-block-list"><li>Personal
Income Tax: Although a slight adjustment to the tax threshold of the income
tax bracket has been made, the remainder of the brackets have remained
unchanged. The impact of this is that You may experience a slight bracket creep
– this means if You move into a new income tax bracket because of a salary
increase then You will pay more tax. The impact of this creep should be
relatively neutral to individuals given South Africa’s progressive tax system
because You earn more money in the new bracket.</li></ul>



<ul class="wp-block-list"><li>Fuel
Levies: The fuel levy will increase by 30c per litre for petrol and 29c
per litre for diesel. The Finance Minister acknowledged that this was below the
amount required by the beleaguered Road Accident Fund. This may be amplified by
world oil prices and the Rand/Dollar exchange rate.</li></ul>



<ul class="wp-block-list"><li>Sin Taxes: The taxes
on sin tax items increased. If You are a person who enjoys any of the following
products expect to face the following price increase.</li><li>A beer will cost you 12c more and the total
levy stands at R1.74</li><li>Wine increased by 22c per bottle and the total
levy stands at R3.15</li><li>Sparkling wine increased by 84c per bottle and
the total levy stands at R10.16</li><li>Whiskey increased by R1.14 per bottle and the
total levy stands at R65.84</li><li>Cigarettes increased by 64c per pack and the
total levy stands at R7.80</li></ul>



<ul class="wp-block-list"><li>Social
Grants: Social grants were increased moderately to attempt to appease both
the socialists who expect larger social grants and capitalists who believe that
they need to be reined in. The following changes to the value of social grants
were announced.<ul><li>The old age and disability pensions increased
by R80 to R1770 per month</li></ul><ul><li>The foster care grant increased by R40 to
R1000 per month</li></ul><ul><li>The child care grant will increase by R10 in
April and R10 in October 2019 to reach R430 per month.</li></ul></li></ul>



Increased
taxes increase net revenue for the State whilst grants decrease the net revenue
for the State. These taxes and grants have not been altered in any significant way
which then begs the question of how will South Africa combat rising debt and
financially distressed state owned entities (SOEs)? The Finance Minister‘s main
solution to this problem is to implement a reduction to the size of the state’s
wage bill of R27 billion over 3 years. But how will this be achieved? This
would be done by offering older servants early retirement and placing limits on
overtime, bonuses and pay progression in the future – will this be enough to
arrest the growing GDP deficit and ailing SOEs? Probably not and therefore Minister
Mboweni gave an indication into the potential philosophy for raising tax
revenues in future when he spoke about his belief in the “user must pay”
principle. Undoubtedly, Mboweni was referring to the existing E-Toll and Eskom
sagas. These statements provide sufficient evidence to suspect that when the
new electricity tariff is announced, NERSA will grant Eskom a larger increase
than in recent years. Similarly, this suggests that the E-Toll system will not
be scrapped in the short term. Both of these possible outcomes are negative to
You, the user.



Finally
the overall themes that characterised this year’s budget speech are as follows:




<ul class="wp-block-list"><li>Tax changes on individuals are to be kept as
neutral as possible.</li><li>The Finance Minister is an advocate of the
“user must pay” principle which could see tariffs charged on individuals, such
as electricity and E-Tolls being increased as a means of moving the financial
burden more onto the user than the state. </li><li>Indebted state owned entities will not be
bailed out and will need to repay any loans they receive from government and
comply with government’s requirements for lending them money.</li><li>For the time being government believes that we
are on track to peak at a 60% debt to GDP ratio.</li></ul>



In summary, it was a fairly uneventful
budget speech &#8211; in line with most expectations that it would be lacking
surprises as this is an election year. Whether or not foregoing making
meaningful changes to the revenue raising model this year will impact our debt
to GDP in the future remains to be seen, but for now, the tax burden on
individuals has remained relatively unchanged. It is the future we should worry
about.

South Africa Budget Day

South Africa readies ‘most important’ budget yet as recovery hangs in the balance

Moody’s rates SA’s #Budget2020, warns risks remain skewed toward a higher debt path

SA trade union COSATU says it won’t allow workers’ wages to be slashed

#Budget2020: Rating SA’s Budget 2020, has it done enough to avoid a downgrade?

#Budget2020: What Budget 2020 means for you & your wallet

#Budget2020: Funding state owned enterprises

#Budget2020: What finmin Mboweni’s budget speech means for business

#Budget2020: Expert analysis of finmin Mboweni’s 2020 Budget Speech

#Budget2020: SA’s Budget analysed

#Budget2020: SA finmin Mboweni delivers his 2020 Budget Speech (full speech)

#Budget2020: South Africans get a tax break; public-sector wage bill cut

#Budget2020: Risk of SA remaining investment grade by Moody’s has become more pronounced

#Budget2020: SA’s Finance Minister Tito Mboweni’s full speech

Post #MTBPS2019 analysis: Markets react to finmin Mboweni’s #midtermbudget speech

SA #MTBPS2019: We are selling assets Finance Minister Tito Mboweni declares

#MTBPS2019: Low growth, high spend continues to plague SA economy, but SAA, Eskom get more funds

Op-Ed: What South Africa’s #Budget2019 speech will mean to you personally

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South Africa Budget Day

South Africa readies ‘most important’ budget yet as recovery hangs in the balance

Moody’s rates SA’s #Budget2020, warns risks remain skewed toward a higher debt path

SA trade union COSATU says it won’t allow workers’ wages to be slashed

#Budget2020: Rating SA’s Budget 2020, has it done enough to avoid a downgrade?

#Budget2020: What Budget 2020 means for you & your wallet

#Budget2020: Funding state owned enterprises

#Budget2020: What finmin Mboweni’s budget speech means for business

#Budget2020: Expert analysis of finmin Mboweni’s 2020 Budget Speech

#Budget2020: SA’s Budget analysed

#Budget2020: SA finmin Mboweni delivers his 2020 Budget Speech (full speech)

#Budget2020: South Africans get a tax break; public-sector wage bill cut

#Budget2020: Risk of SA remaining investment grade by Moody’s has become more pronounced

#Budget2020: SA’s Finance Minister Tito Mboweni’s full speech

Post #MTBPS2019 analysis: Markets react to finmin Mboweni’s #midtermbudget speech

SA #MTBPS2019: We are selling assets Finance Minister Tito Mboweni declares

#MTBPS2019: Low growth, high spend continues to plague SA economy, but SAA, Eskom get more funds

Op-Ed: What South Africa’s #Budget2019 speech will mean to you personally

News Tips

Advertise With Us

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