The budget speech last week Wednesday by Minister Tito Mboweni was one of the shortest for many years. This was appropriate as his news was largely more of the same, with some good news thrown in.
Whereas the rumour mills were predicting tax increases, including a wealth tax, the Minister was able to reduce personal income taxes slightly, offset to some extent by increased sin taxes and a rise in fuel levy. It gave comfort that he, Treasury and SARS are in control and making progress.
Estimated growth for 2020 was slightly ahead of budget and tax revenues collected were R100m better than predicted, so the budget deficit was also lower by a similar amount.
The big challenge is that the key improvement in government finances is still expected to come from cuts in the government wage bill. The unions not surprisingly, are up in arms. It is largely this element which will determine success or failure in the restoration of the SA economy.
Government debt is expected to peak at 89% of GDP, 5 years from now, compared to then previous estimate of 95% forecast previously. This is an improvement, but government will still be paying over 20% of annual revenue away in interest. Interest, together with the wage bill need to be met before there are funds for social grants and improvement projects
It was a pity that there was not more emphasis placed on how to liberate and grow the economy, but President Ramaphosa has highlighted numerous points of focus over the past while to cover that aspect.
We hope that Tito and Cyril are able to deliver on those promises over the next 5 years.
Some specific details:
Tax rate is still between 18% and 45% beyond R1 656 000
Primary rebates increase by 5%
Tax free portion of interest earned remains unchanged
No changes to estate duty, allowable donations or capital gains taxes
No changes to Foreign Exchange allowances.