South African Minister of Finance, Enoch Godongwana, delivered his second National Budget on Wednesday, 22 February 2023. With limited resources available to National Treasury, and the energy crisis taking centre stage, the Minister was severely limited in his policy choices.
Rising interest rates, high inflation, high levels of unemployment, low business and consumer confidence, loadshedding, a weakening exchange rate and global unrest and economic disruptions (amongst other factors) undoubtedly add to South Africa’s challenging macro-economic environment. It is clear that we face an uphill battle if we wish to retain foreign investment and stave off ratings downgrades.
In his speech, the Minister indicated that government’s current prudent fiscal approach would be maintained. With this fiscal discipline in place, the goal is to bring the deficit down, keep expenditure reasonable and not impose debilitating tax hikes, or make cuts to infrastructure and the social wage.
Here are some key take-outs of Minister Godongwana’s Budget Speech:
- The South African economy is projected to grow by 1.4 percent over the next three years
- The current level of tax collection is the highest ever recorded
- Government debt is very high, with gross debt stock projected to increase from R4.73 trillion in 2022/23 to R5.84 trillion in 2025/26.
- A total debt-relief arrangement for Eskom of R254 billion is proposed by Treasury
- Businesses will be able to reduce their taxable income by 125% of the cost of an investment in renewables
- Individuals are able to claim a rebate of 25% on solar panels installed up to a maximum of R15,000
- There were no major tax proposals and the tax- free threshold will increase from R91,250 to R95,750
- The general fuel levy and the Road Accident Fund levy will not be increased this year
- The diesel fuel levy refund will be extended to manufacturers of foodstuffs for a period of 2 years, from 1 April 2023 until 31 March 2025.
- The social relief from distress grant (SRD) has been extended until March 2024
- Monthly social grants have been adjusted as follows:
- Old age grant up from R1,985 to R2,085
- Old age grants for those over 75 increased to R2105
- War veterans grant up from R2105 from R2005
- Disability grants up to R2085
- Foster care grants up to R1125
- Care dependency grants up to R2085 from R1985
- Child support grants up to R505
- Grant in aid up to R505
•Sin taxes are up and South Africans will now have to fork out the following:
- 10c more on a 340ml can of beer
- 18c more on a 750ml bottle of wine
- R3.90 more on a 750ml bottle of spirits
- R5.47 more for a 23-gram cigar by R5.47
- 98c more on a pack of 20 cigarettes
As always, everyone (especially from opposition political parties) say that more could and should have been done by the Finance Minister – but overall, most analysts see the 2023 budget as balanced and acceptable, albeit with serious downside risks.
However, for people on the ground – the Minister’s budget speech didn’t mean very much. Infact, very few ordinary South Africans were even aware that the budget speech was being delivered. They were too busy dealing with the devastating impact of continuous loadshedding on their businesses and homes. They were too busy trying to unburden themselves from the shackles of consumer debt. They were too busy seeking employment and hustling for some form of income to (literally) put bread on the table. But sadly, most of them were too busy waiting in queues for social grants which have become the lifeline of millions of South Africans.
So whilst I think Finance Minister Godongwana did a good job with what he has at his disposal, and delivered a sensible budget – I look forward to an era in South Africa wherein the annual budget speech puts forth a realistic, sustainable and substantive plan to eradicate poverty, reduce unemployment and see South Africans thrive, not merely survive.
