South Africa’s Finance Minister Tito Mboweni, wearing a
fiery red tie and full of energy was at pains during a press conference with media
, ahead of his maiden Budget, to say that Treasury is not giving troubled-state
owned entity Eskom a bailout or taking on its debt but rather funding it to the
tune of R69bn over the next three years or R23bn a year. This is to financially
support it during its reconfiguration.



In the State of the Nation Address, President Cyril
Ramaphosa announced that Eskom will be reconfigured into three independent
components: generation, transmission and distribution. 



Mboweni warned that the fiscal support to Eskom is
conditional. 



In his Budget speech he states that “pouring money directly
into Eskom in its current form is like pouring water into a sieve.&nbsp; 



“I want to make it clear: the national government is not
taking on Eskom’s debt. Eskom took on the debt. It must ultimately repay it. We
are setting aside R23 billion a year to financially support Eskom during its
reconfiguration.&nbsp; 



“The fiscal support is conditional on an independent Chief
Reorganisation Officer (CRO) being jointly appointed by the Ministers of
Finance and Public Enterprises with the explicit mandate of delivering on the
recommendations of the Presidential Task Team. We will make announcements in this
regard in the coming weeks.”



The minister described this process as essentially placing,
what many see as the biggest risk to South Africa under curatorship.&nbsp; 



“We are not just loaning Eskom money, we want to look after
every rand and cent we give them” he said. 



Staunchly the minister warned other state owned enterprises
seeking funding from Treasury that the days of bailouts are over. If they want
funding we will appoint a CRO and essentially place them under curatorship.
This will make them reluctant to come to Treasury, he said. 



Labouring the point in his speech he said “We must tighten
the guarantee rules. If a state-owned enterprise applies for a government
guarantee for operational purposes, it will be required to appoint a CRO in
concurrence with the National Treasury and its bondholders. The CRO will
undertake a full operational and financial review. When banks need state
support, we appoint a curator. When provincial and municipal finances are in
disarray, government can take over the running of the administration. These
rules should also apply to all SOEs.&nbsp; 



“Cabinet is considering a proposal to end the issuing of
guarantees for operational purposes. Expiration dates on guarantees will also
be strictly enforced. As the President announced, strategic equity partners
will be found where possible. “



The minister in his speech also said the time has come for the
country to ask “do we still need these enterprises? If we do, can we manage
them better? If we don’t need them, what should we do?”



Asked why he posed this question and what his answer would
be, he said he wanted to agitate a conversation.



“We need to move with the times. We need to establish what
our priorities are. Should R10bn be put in a loss-making airline or the taxi
and railway industry?



“Who are we serving by the decisions we take?”



He added that we need a forum to discuss these questions, in
Eskom’s case with the trade unions, bondholders, management and the relevant
ministers.



“The status quo is not working, we have to cross the Rubicon
on the other side of Rome.”

#Budget2019: Government not taking on #Eskom’s debt but will provide funding, place it under curatorship

Treasury sets out plans to render on to Caesar what belongs to Caesar. Read South Africa&#8217;s finance minister, Tito Mboweni&#8217;s budget speech in full:



<a href="http://cnbc.africa/wp-content/uploads/2019/02/2019-BUDGET-SPEECH.pdf">Finance minister Tito Mboweni&#8217;s maiden budget</a>

IN FULL | #Budget2019: Tito Mboweni’s maiden speech

Treasury sets out plans to render on to Caesar what belongs
to Caesar. 



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



Revenue collection remains a bugbear for government due to weak economic growth and tax administration concerns, which were self-inflicted, South Africa’s Finance Minister Tito Mboweni told journalist in a Budget press conference.



The revised tax revenue estimate for 2018/19 is R15.4 billion lower than anticipated by the 2018 Medium Term Budget Policy Statement (MTBPS) estimate. Thus the projected revenue shortfall of R27.4 billion is now R42.8 billion compared with the 2018 Budget estimate. 



This sombre news was revealed by Mboweni in his maiden Budget on Wednesday. To address this shortfall, tax changes designed to raise R15 billion in additional tax revenue in 2019/20 have been introduced.



These among others include:



<ul class="wp-block-list"><li>Increasing the tax-free threshold for personal income taxes from
R78 150 to R79 000. No changes will be made to personal income tax
brackets.&nbsp; </li><li>Increasing the fuel levy by 29c/litre, consisting of a 15c/litre
increase in the general fuel levy, a 5c/litre increase in the Road Accident
Fund (RAF) levy and the introduction of a carbon tax on fuel of 9c/litre.&nbsp; </li><li>Increasing excise duties on alcohol and tobacco products by between
7.4 per cent and 9 per cent. The targeted excise tax burden for wine, beer and
spirits is 11 per cent, 23 per cent and 36 per cent respectively.</li><li>No change in the monthly medical tax credit for medical scheme
contributions.</li><li>Increase in health promotion levy from 1 April from 2.1c to 2.21c
per gram in excess of 4 grams of sugar per 100ml. </li><li>Limiting the RAF levy diesel refund for primary production
industries to ensure that diesel users in these sectors equitably contribute
towards their RAF indemnity.</li><li>The implementation of carbon tax on 1 June 2019. </li><li>Government proposes to align the tax treatment on ad valorem
excise duty on motor vehicles Because of the way ad valorem excise duty is
calculated, vehicles produced locally are taxed at a higher rate than imported
vehicles. </li><li>Government intends to publish draft legislation for public comment
during 2019 on a gambling tax. </li><li>Urban development zone tax incentive to be reviewed. </li><li>South Africa reviewing its oil and gas tax regimes in 2019. </li><li>Taxing electronic cigarettes and tobacco heating products. </li><li>Definition of fuel levy goods for tax purposes to be reviewed may
include mineral ethanol, illuminating paraffin, aviation kerosene, liquefied
petroleum gas, compressed natural gas – as well as biofuels such as bioethanol
and biogas</li><li>Tax on “single-use” plastics including straws, caps, beverage cups
and lids, and containers to curb their use and encourage recycling will be
considered. </li></ul>



READ MORE : IN FULL | <a href="http://cnbc.africa/news/2019/02/20/in-full-budget2019-tito-mbowenis-maiden-speech/" target="_blank" rel="noreferrer noopener" aria-label="#Budget2019: Tito Mboweni’s maiden speech (opens in a new tab)">#Budget2019: Tito Mboweni’s maiden speech</a>



Although few, government has also introduced a number of tax incentives. These include: 



<ul class="wp-block-list"><li>From 1 March 2019, employers participating in the Employment tax
incentive will be able to claim the maximum value of R1 000 per month for
employees earning up to R4 500 monthly, up from R4 000 previously. The
incentive value will taper to zero at the maximum monthly income of R6
500.&nbsp; </li><li>From 1 April 2019, the list of items for zero-rating for VAT will
include white bread flour, cake flour and sanitary pads.&nbsp; </li><li>Energy-efficiency savings tax incentive to be extended to 31
December 2022. During 2019, government will review the design and
administration of the incentive to improve its ease of use, effectiveness and
economic impact.&nbsp; </li></ul>



Treasury has also recognised that to render on to Caesar, what belongs to Caesar it needs to restore the efficiency of SARS. To do this it plans to:



<ul class="wp-block-list"><li>Appoint a new SARS Commissioner in the coming weeks.</li><li>It has established a new Illicit Economy Unit to fight trade in the illicit economy.  </li><li>Officially launch the Large business Unit in early April 2019.  </li><li>Strengthen SARS IT team &amp; systems. </li><li>Establish information sharing agreements with allies to help fight cross-border tax evasion schemes.</li><li>Set up an inspector-general for tax administration.</li><li>Through internal processes, SARS will implement recommendations concerning inappropriate actions, fruitless and wasteful expenditure, unfair labour practices and maladministration.  </li><li>SARS will review contracts that breached public procurement regulations and will act to recover funds spent.  </li><li>SARS is normalising refund payments. </li></ul>

#Budget2019 | Tax changes highlighted: little tax relief

JOHANNESBURG (Reuters) &#8211; Moody’s said on Friday that a weaker fiscal outlook in South Africa’s medium-term budget policy statement issued this week was a credit negative, sending the rand weaker.
“The government’s revised budget policy statement projects larger fiscal deficits and higher government debt, amid slower growth, a weaker rand and higher interest rates than expected in February, a credit negative,” Moody’s said in a research note.
Moody’s is the last of the top three agencies to still rate the country investment grade.
Reporting by James Macharia; Editing by Robin Pomeroy

Moody’s says weaker fiscal outlook highlighted in SA’s mini budget a credit negative

Quoting Nelson Mandela and Charles Dickens, new Finance Minister Tito Mboweni’s climbed into the driving seat of South African economic policy, with aplomb, with his maiden mini-budget speech. His mere avuncular presence could revive comforting memories of better times – say, in 2005, when Mboweni was Reserve Bank Governor and the economy was cooking with 5% growth – times that the flagging economy needs to bring back badly right now.
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity,” says Mboweni with an apt quote from Charles Dickens in his book A Tale of Two Cities.
In his years of semi-retirement, spent fishing, farming and investing, Mboweni has been full of forthright opinions about what the once thriving South African economy needs to do to recover. Now he has a golden opportunity to do something about it in a tough job where he will have his work cut out for him in this quest for elusive growth.
With his trademark humour and  forthright opinion, the mere expectation of the  speech saw  the rand running to a three-week high – yet it was peppered with worrying news. The growth figures tripped easily off the tongue, but is likely to be a concern: GDP growth revised downwards to 0.7 from 1.5%, in 2018, following a recession in the first half of the year, at a time when the world economy is growing at 3.7%. Growth is predicted to recover to a mere 2.3% by 2021.
Debt is another worry. Mboweni said gross debt is expected to stabilise at 59.6% of GDP, but only by 2023/24. Analysts believe this could not only mean South Africa spends millions more every year on repayments but also the undermining of the reputation of the economy in the eyes of the ratings agencies. On top of this tax revenue has been revised down by R27.4 billion in 2018/19, R24.7 billion in 2019/20 and R33 billion in 2020/21 relative to the 2018 Budget. This mainly reflects higher-than-expected VAT refunds.
Yet another worry is in the skies over Africa. Mboweni said there will be reform and yet more cash to bail out the ailing South African Airways, despite the view among analysts that this is good money being thrown after bad.
One of the biggest cheers during the speech was for the VAT zero-rating for sanitary pads, along with bread and cake flour. Long overdue, some said.
In this vein, on the positive side, with an election just around the corner, there was a pledge of trillions for certainties for the people in the shape of water electricity services, and social grants. Less clear is how Mboweni plans to kick start growth.
Mboweni rounded off with a quote from his mentor: Mandela.
“Difficulties break some, but make others. No axe is sharp enough to cut the soul of a sinner who keeps on trying, one armed with the hope that he will rise even in the end.”
If that is not a quote made for Mboweni and his new, difficult, job- I don’t know what is. But please, spare us more Dickensian Hard Times.

MTBPS2018: Tito Mboweni talks tough in hard times

By Monique Vanek
In the forward to Medium Term Budget Policy Statement (MTBPS) it warns that South Africa finds itself at a crossroads and highlights the difficult economic and fiscal choices confronting government over the next several years. These are the key takeaways:
Economic
• The consolidated budget deficit narrows from 4.2% in 2019/20 to 4% in 2021/22. 
• Gross debt is expected to stabilise at 59.6% of GDP in 2023/24. 
• GDP growth revised downwards to 0.7 from 1.5% in 2018 following a recession in the first half of the year. 
• GDP growth is expected to recover gradually to 2.3% by 2021 
• Global economy expected to continue growing at 3.7% 
• Tax revenue has been revised down by R27.4 billion in 2018/19, R24.7 billion in 2019/20 and R33 billion in 2020/21 relative to the 2018 Budget. This mainly reflects higher-than-expected VAT refunds. 
• In 2017/18, for the first time since the 2008 global financial crisis, tax revenue growth did not exceed GDP growth. 
• The cost of servicing government debt is expected to exceed 2018 Budget estimates by R1 billion in 2018/19, R4.9 billion in 2019/20 and R7.9 billion in 2020/21. This reflects a larger main budget deficit, currency depreciation and higher interest rates. An estimated 15.1 per cent of main budget revenue will be used to service debt in 2021/22 compared with 13.9 per cent in 2018/19. 
• Main budget revenue is projected to increase from 25.7% of GDP in 2018/19 to 26% of GDP in 2021/22. Main budget expenditure is estimated to remain stable at 30.2% of GDP over the medium term
Where the money will go
• The Medium-term expenditure framework commits public resources of R5.9trn over the next three years. Of this amount: 
&#8211; R3.3trn or 56.2% t will be allocated to education, health, the provision of water and electricity services, and social grants. 
&#8211; 
• Government is proposing reprioritisation of R32.4bn over the next three years. Of this amount: 
&#8211; R15.9bn goes towards faster-spending infrastructure programmes. 
&#8211; R16.5bn will be allocated to various programmes, including recapitalising the South African Revenue Service (SARS), a minimum wage for community health workers, critical posts and goods and services in health, and streamlining the management of the justice system. 
&#8211; In addition, changes to grant structures amounting to R14.7 billion will promote upgrading of informal settlements in partnership with communities. 
&#8211; Housing subsidies amounting to R1 billion will be centralised to better support middle- and lower-income home buyers. 
• In the current year, R1.7 billion is added to infrastructure spending (including funding for fast-spending school building programmes) 
• R3.4 billion is allocated to drought relief, mostly to upgrade water infrastructure aside funding for this purpose. 
• R3.4 billion is allocated in 2018/19 to provide water, improve infrastructure and offset the economic costs of drought. Funding is also provided for the South African Isotope Facility at iThemba Labs and, following approval through the Budget Facility for Infrastructure, for the MyCiti Phase 2A bus programme in the City of Cape Town. 
• R800 million added to the school infrastructure backlogs grant to complete approved projects. 
• R3.4 billion is allocated to the education infrastructure grant. Funds are also allocated to the same grant to continue repairing infrastructure damaged by storms and floods in KwaZulu-Natal in 2017. 
• The Department of Women has developed a framework to provide free sanitary towels to learners from low-income households. The project rollout is funded through the provincial equitable share. 
• Local government equitable share, which finances free basic services to low-income households and some administrative costs for municipalities, is expected to grow by9.4 per cent per year to R82.2 billion by 2021/22. 
• Over the medium term, public transport expenditure is expected to increase to R101.1 billion as integrated public transport networks are built and operated in 13 cities.
State owned entities
• South African Airways will receive R5 billion through a special appropriation bill to settle debt redeeming between now and March 2019. This will help to prevent a call on the airline’s outstanding debt of R16.4 billion, which is guaranteed 
• R1.2 billion is allocated to South African Express Airways. 
• The South African Post Office receives R2.9 billion to reduce debt levels
National Health Insurance
• R166 million added to the national health insurance (NHI) indirect grant (health facility revitalisation) component to procure medical equipment and to design a new academic hospital in Limpopo. 
• R546 million reprioritised within the NHI indirect grant to address the critical shortage of medical professionals in the health sector, and to procure beds and linen for health facilities.
Tax changes
• In 2019 annual adjustments to personal income tax brackets, levies and excise duties in line with inflation are expected. 
• White bread flour, cake flour and sanitary pads will be zero-rated from 1 April 2019.
Students
• The Department of Higher Education and Training is developing a funding framework to clarify students’ food, book, transport and accommodation allowances, and the obligations required of bursary students during and after their studies. 
• Funds recommended through the Budget Facility for Infrastructure, and from educational institutions and the department, will support the Student Housing Infrastructure Programme. Over the next 10 years, it will provide 300 000 new beds at universities, and technical and vocational colleges. 
• Over the medium term, an estimated R61.5 billion in revenue from the skills development levy will continue to expand participation in learnerships, internships and skills development programmes.
Land reform
• Government is working with the Land Bank to accelerate land reform and maintain the productive use of transferred land. 
• Under the Land Reform Programme, government will provide 30-year leases, enabling the Land Bank to extend loans to emerging farmers. 
• The Land Bank will use a combination of loans and grants to increase production through the Black Producers Commercialisation Programme. Funding from the comprehensive agricultural support programme grant will be reprioritised to produce foot-and-mouth disease vaccines.

SA’s #MTBPS2018: Key takeaways

By Monique Vanek
The public servants wage bill remains the single largest component of expenditure in the Medium Term Policy Framework, but with elections approaching in 2019 the Medium Term Budget Policy Statement (MTBPS) provided no concrete plans to address this, only stating that government is working on an approach to manage these pressures over the medium term.
According to the MTBPS, public servants compensation, accounts for 34.7 per cent of consolidated expenditure, and forms the major driver of spending pressures. The MTBPS highlights that “it is one of the fastest-growing items in the budget, increasing at an average of 11.2 per cent a year”.
It adds that “the 2018 public-service wage agreement (see box) exceeded budgeted baselines by about R30.2 billion through 2020/21. National and provincial departments are expected to absorb these costs within their R1.8 trillion compensation baselines over the same period.”
The MTBPS also states that “over the long term, government and trade unions need to agree on an approach that ensures fair remuneration and a sustainable wage bill”. 
An annexure to the MTBPS deflects that issue of the amount of public servants to earnings growth, stating that “earnings growth, rather than headcount, has been the major driver of the public-service wage bill over the past decade”.
The annexure says an analysis of compensation spending since 2006/07 reveals the following trends:
• The main driver of increased spending is large increases in wages and other employee benefits, rather than increases in employment. 
• The increase in average real wages is partly explained by above-inflation agreements reached between government and unions, but wage progression and promotion policies account for a considerable proportion of the rise. 
• Wages have increased most rapidly in the lowest ranks of the public service, compressing wage distribution. 
• Overall, the number of public servants has increased since 2006/07. Employment peaked in 2012/13, after which personnel numbers have fallen by just over 1 per cent. This decline is insufficient to contain real spending growth due to continued growth in real wages. 
• There is a significant amount of turnover in the public service, with as many as 6 per cent of personnel leaving in a given year.

#MTBPS2018: Public servants’ wages balloon, but headcount is not to blame

By Monique Vanek
Despite an economy on the ropes, evident by slower than expected growth, South Africans can breathe a sigh of relief as forecasted increases in value added tax (VAT) and other anticipated tax hikes are not expected. The Medium Term Budget Policy Statement (MTBPS) states that “increases in major tax instruments will be avoided unless the economic environment requires it.
“At this stage, revenue projections assume no changes to tax rates, but provide for annual adjustments to personal income tax brackets, levies and excise duties in line with inflation”. 
Despite hopes that chicken would be made VAT free, no mention was made of this, instead the MTBPS states that as per the recommendations of a panel of experts which were commissioned to investigate mitigating the effect of the VAT rate increase introduced in April on low-income households, government proposes to zero-rate white bread flour, cake flour and sanitary pads from 1 April 2019.

SA’s #MTBPS2018: These are the tax changes government is warning of

By Monique Vanek
The Medium Term Budget Policy Statement (MTBPS) has confirmed that the South African Revenue Service (SARS) under its former Commissioner Tom Moyane delayed paying tax refunds, which is now hurting revenue.
According to its current Commissioner Mark Kingon, whether this was intentional or not is up for debate but he believes it was not intentional.
Kingon in a closed media briefing said SARS is currently evaluating why refund payments slowed.
The MTBPS points a negative picture of what happened to tax revenues under Moyane’s tenure and the aftermath: “A backlog of VAT refunds at SARS, and an underestimation of refunds due, has led to an overly optimistic view of revenue growth. Net VAT collections account for about R20 billion of the in-year revenue shortfall. Two factors account for the revision in net VAT. The VAT refund estimate has been revised upwards by R9 billion, and about R11 billion will be paid out to clear the backlog in the VAT credit book (see table).
“The remaining R7.4 billion of the shortfall in the current year mostly reflects slower corporate income tax collections due to weak growth in wholesale and retail trade, manufacturing and transport. Personal income tax continues to be negatively affected by job losses, moderate wage settlements, lower bonus payments and a slower expansion of publicsector employment”.
The MTBPS also states: “In 2017/18, for the first time since the 2008 global financial crisis, tax revenue growth did not exceed GDP growth. Revenue shortfalls have widened over the past four years, with under-collections rising from R7.4 billion in 2014/15 to R49 billion in 2017/18. These shortfalls would have been larger were it not for increases in personal income, dividend withholding, capital gains and other taxes. Revenue collections in 2017/18 were R0.8 billion lower than estimated in the 2018 Budget. Revenue collection for the first six months of 2018/19 grew by 10.7 per cent compared with the same period last year. However, the technical recession experienced in the first half of the year has begun to feed through to revenue collection, which has slowed. Weaker economic growth, alongside a once-off payment of overdue VAT refunds, will result in an in-year revenue shortfall now estimated at R27.4 billion, relative to the 2018 Budget estimate.”

#MTBPS2018: SARS withheld tax refunds under former Commissioner Moyane, these are the consequences…

#MTBPS2018: A look at SA Finmin Tito Mboweni’s Medium-Term Budget Policy Statement

JOHANNESBURG (Reuters) &#8211; The South African rand was little changed early on Wednesday, as investor caution reigned ahead of a closely watched budget speech by the country’s finance minister.
At 0550 GMT, the rand traded at 14.2700 versus the dollar, a shade weaker from its close of 14.2625 on Tuesday.
Recently appointed Finance Minister Tito Mboweni is expected to announce revised budget deficit targets and growth forecasts, as well as measures to boost the economy and shore up struggling state-owned companies.
The tone of his medium-term budget speech will influence whether Moody’s strips South Africa of its last investment grade credit rating at a review expected after the speech.
“South Africa’s new finance minister will probably announce further fiscal tightening,” John Ashbourne at Capital Economics said in a note.
“This will likely placate ratings agencies, but supports our view that economic growth will remain weak.”
Government bonds were slightly stronger in early deals, with the yield on the benchmark instrument due in 2026 down 4 basis points to 9.125 percent.
Reporting by Alexander Winning; Editing by Sunil Nair

How is the South African rand performing ahead of finmin Mboweni’s mini budget speech?

By Arshad Abba, Global Vice-President of Canback Consulting
In recent months we have seen some confidence return to South Africa&#8217;s market and a mood of optimism in everyday life as we vision a new dawn under the leadership of President Cyril Ramaphosa. A dark cloud still looms overhead in the form of wasteful expenditure and struggling State Owned Entities (SOEs) that have emptied the coffers of South Africa and continue to require funding from the government to remain going concerns. Ultimately, this will need to be funded and a large part of this will need to come through taxes.
In releasing the budget in February this year, government took a brave step to increase the VAT rate, that will have far reaching consequences for both rich and poor. Although this has been positive from an investor perspective, is this something the consumer can afford along with other sin taxes including a newly released sugar tax?
Much has been said about the budget, but not much time has been spent in quantifying the impact on consumers at different income levels. In a society like South Africa with high disparities between rich and poor, income elasticity plays an important part where any increase in price has an almost immediate impact on buying behavior, with consumers especially at the lower levels switching to cheaper products of possibly inferior quality or stopping buying products from that category at all.
In analysing buying behaviour it is important to understand consumption patterns across different socio- economic levels, as this defers significantly. This is summarised below:
<img loading="lazy" decoding="async" class="alignnone size-full wp-image-308090" src="http://cnbc.africa/wp-content/uploads/2018/05/Canback-graphic-1.png" alt="" width="745" height="458" />
Source: ILO, C-GIDD, Canback Consulting
The marginalized population (Average Annual income below R26,000), making up more than 50% of SA society, spend about 35% of what they earn on food and beverages. Over 50% of their income is spent on basic goods. The graph above highlights the great disparity between rich and poor in buying behavior, driven by income levels and affordability.
In further analysing the impact of the budget, using Stats SA data for consumption expenditure, further breakdown through our analysis into the socio-economic classes we concluded that in percentage terms the average impact across all levels is about 5.6%. This is a further 40% increase to the impact of inflation (4%) data released for February 2018. The impact across socio-economic levels is highlighted in the table below:
<table width="601">
<tbody>
<tr>
<td width="236"> Socio economic levels</td>
<td width="163">Impact (%)</td>
<td width="112">Inflation</td>
<td width="91">Total impact</td>
</tr>
<tr>
<td width="236">Upper and upper middle</td>
<td width="163">2.1%</td>
<td rowspan="5" width="112">4.0%</td>
<td width="91">6.1%</td>
</tr>
<tr>
<td width="236">Middle</td>
<td width="163">1.8%</td>
<td width="91">5.8%</td>
</tr>
<tr>
<td width="236">Lower middle</td>
<td width="163">1.7%</td>
<td width="91">5.7%</td>
</tr>
<tr>
<td width="236">Lower</td>
<td width="163">1.7%</td>
<td width="91">5.7%</td>
</tr>
<tr>
<td width="236">Marginalized</td>
<td width="163">1.5%</td>
<td width="91">5.5%</td>
</tr>
</tbody>
</table>
Source: Canback Consulting
The increases, at the lower end is less than the upper end mainly attributable to a larger consumption of basic foods with a portion of that being zero VAT rated and lower % of expenditure branded goods, including alcohol, tobacco and sugary drinks.
Although it seems the impacts are similar in percentage terms, we should keep in mind that a R55 increase to a consumer for every R1,000 spent for those spending more then 50% of their income on basic needs is far greater than a R 61 increase to a consumer on every R1,000 spent at the higher end where only 12% is attributable to food and beverages
Reducing the impact by removing the VAT impact makes for interesting reading. This is illustrated in the table below:
<table width="608">
<tbody>
<tr>
<td width="239">Socio economic levels</td>
<td width="165">Impact (%)</td>
<td width="113">Inflation</td>
<td width="92">Total impact</td>
</tr>
<tr>
<td width="239">Upper and upper middle</td>
<td width="165">1.6%</td>
<td rowspan="5" width="113">4.0%</td>
<td width="92">5.6%</td>
</tr>
<tr>
<td width="239">Middle</td>
<td width="165">1.4%</td>
<td width="92">5.4%</td>
</tr>
<tr>
<td width="239">Lower middle</td>
<td width="165">1.3%</td>
<td width="92">5.3%</td>
</tr>
<tr>
<td width="239">Lower</td>
<td width="165">1.2%</td>
<td width="92">5.2%</td>
</tr>
<tr>
<td width="239">Marginalized</td>
<td width="165">1.0%</td>
<td width="92">5.0%</td>
</tr>
</tbody>
</table>
Source: Canback Consulting
This will reduce the impact by about 10% of the total impact, or excluding an inflation increase it will reduce the impact on the consumer by one third (33%). This highlights its significance in the budget impact. Coupled with the recent price increase on fuel, with prices over time being passed on to consumers we can expect 2018 to be a tough year for the consumer, that would impact an already stuttering economy trying to get going again.
Lower to medium end consumers will struggle to absorb the latest budget and further increases may have dire consequences for them. South Africa can not afford any more slip ups and expect to pass on this cost to the consumers through budget increases.
For this to materialise policy changes is necessary. This includes a commitment to improving education at all levels and ensuring accessibility to grow the workforce, a firm commitment from government that it will not fund inefficiencies by acting as lender and guarantor of last resort to State owned Entities (SOEs), reducing the public sector wage bill with salaries for government employees at 35% of expenditure, , improving governance and fiscal discipline within the public sector and at SOEs, instituting reforms across SAs most important sectors to drive investment and transformation; and creating a business conducive environment within the private sector to ensure ease of doing business mainly for small to medium enterprises (SMEs).
The government’s inability to address these items in future will further impact confidence and the economy and drive up tax rates for consumers.

SA’s budget reforms, what the real impact will be for South Africans

By Tertius Troost, Tax Consultant at Mazars
The South African braai &#8211; a pastime for all seasons. In our diverse nation, this is truly an activity all can relate to. As we edge closer to 1 April 2018 it seems that this delightful pastime will come at an increased cost.
For many this sounds like an April Fool’s joke, but on 1 April 2018 we will see the introduction of the health promotion levy (colloquially referred to as Sugar Tax) and the increase of the VAT rate from 14% to 15%. In addition three days later, on 4 April 2018, South Africans will be paying more for fuel due to the increase in the general fuel levy (+ R0.22/litre) and Road Accident Fund levy (+ R0.30/litre).
In anticipation of these increases, together with the usual increases in sin taxes already applicable from 1 March 2018, I have decided to perform a back-of-the-blitz-packet calculation to illustrate the amount of tax that will be paid by a person purchasing goods for a braai. Most citizens of Mzansi are not even aware of these taxes and their additional contribution to the South African fiscus – hence it is sometimes referred to as stealth taxes.
In the following calculation, I have selected certain South African favourites to demonstrate the effect of the stealth taxes on a braai after 4 April 2018: 
<img loading="lazy" decoding="async" class="alignnone size-full wp-image-302009" src="http://cnbc.africa/wp-content/uploads/2018/03/Braai1.png" alt="" width="980" height="600" />
The results are quite alarming. On a budget of R600, the total stealth taxes amount to R182.57, or put differently, 30% of the total price. That said, the results are somewhat skewed, due to the sin tax on spirits (i.e. the brandy) making up a third of the total tax payable. Even if this item is removed in totality, approximately 22% of the total basket still consists of taxes.
It should be taken into account that these items are purchased with so-called after-tax money. In other words, for a salary earner, the R600 spent is the amount remaining after taxes have been withheld by an employer (in the form of pay-as-you-earn). Therefore, a person with an average personal income tax liability of 35% would need to earn R923 before tax, and after R323 has been paid in personal income tax, a further R182 would be paid in the form of indirect taxes when purchasing the above goods. This person effectively pays 55% tax on the goods for the braai.
Comparing these results to the same set of facts 10 years ago indicates that the taxes paid on the same basket of goods would only have amounted to 22%. This estimate is prepared on the assumption that all prices increased by 6%[1] over the 10 years, excluding fuel as this was adjusted to the prevailing fuel price. If, similar to the previous calculation, spirits (i.e. the brandy) is removed the taxes amount to 17% of the total basket. To add insult to injury, during this time the top marginal tax bracket was only 40%. 
<img loading="lazy" decoding="async" class="alignnone size-full wp-image-302011" src="http://cnbc.africa/wp-content/uploads/2018/03/Braai2.png" alt="" width="974" height="619" /> 
It is clear that indirect tax increases have outstripped inflation over the past 10 years and, based on the current budget deficit figures, further tax increases can be expected. Instead of additional taxes, South Africa requires tax incentives to promote growth in order to collect the additional revenue required. Perhaps this should be discussed with National Treasury over a braai.

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