Minister of Finance Tito Mboweni delivered his maiden Budget Speech at Parliament on Wednesday. Although many have expressed disappointment at the speech, Mboweni addressed many pressing topics in South Africa.
“Today, I submit before this August House the National Budget. It reflects, to the best of my judgment, the nation’s financial situation. It is in the interest of our people and our country, and not in the narrow objectives of any political party. It is to safeguard the sound financial status of the Republic,” Mboweni said in his speech on Wednesday evening. “I do this in my role as Minister of Finance, performing my fiduciary responsibility as the guardian of the nation’s finances.
“Despite our best efforts, sometimes, ravages and risks such as pests or rot could attack our green shoots, but we must persevere; we must prune and pluck away at the rot, until there is growth. This we must do as a collective,” he said.
He added, “We walk into this house with an iconic South African plant, the aloe ferox. This is one of the best known South African plants. It has a long history of medicinal use. It is resilient, sturdy and drought resistant. It withstands the elements. We must take the bitter with the sweet. Today, I bring you a seed to prove that if we plant anew, we can return to those plum times.”
Growth since October Medium Term Budget Policy Statement
In October, Mboweni projected that in 2018/19 tax revenue would be R1.3-trillion and that spending would be about R1.5-trillion. That left the country with a budget deficit of R215-billion, or 4.3% of GDP.
“We expected economic growth of 0.7% in 2018. This is still our estimate. But, many of the risks that we warned about have materialised,” the Minister said. “We now expect a slower but still steady recovery after the 2018 technical recession. It is expected that real GDP growth in 2019 will rise to 1.5%, and then strengthen moderately to 2.1% in 2021.”
Tax revenue and raising SARS capacity
“In this current year, tax revenue has been revised down by R15.4-billion compared to our October estimate,” Mboweni said. “Approximately half of the increase in the shortfall since October is due to higher-than-expected VAT refunds. This lowers revenue collection for the year, but puts money back into the economy.”
According to Mboweni, SARS is being “fixed” in the following ways:
– A new Commissioner will be appointed in the coming weeks
– A new Illicit Economy Unit launched in August 2018 will continue to fight the trade in illicit cigarettes and tobacco
– The large business unit was a major source of tax collection, and its skill was renowned. This unit will be reintroduced and will be formally launched in early April 2019. SARS is strengthening its IT team and its IT systems, crucial for tax collection efforts
– Information-sharing agreements with allies will help fight cross-border tax evasion schemes.
Excise duties on alcohol and tobacco have increased by:
– The excise duty on a can of beer goes up by 12 cents to R1.74
– A 750ml bottle of wine will have an excise duty of R3.15, which is 22 cents higher
– The duty on a 750ml bottle of sparkling wine goes up by 84 cents to R10.16
– The duty on a bottle of whiskey will go up by R4.54 to R65.84
– A pack of 20 cigarettes goes up by R1.14 cents to R16.66
– The excise duty on a typical cigar will go up by about 64 cents to R7.80
– There will be no change to the excise duty on sorghum beer.
Fuel levies and the Road Accident Fund
– Fuel levies will increase by 29 cents per litre for petrol and 30 cents per litre for diesel, and the Road Accident Fund levy increase is not enough to match the Fund’s R215-billion liability.
“The National Treasury will work with the Department of Trade and Industry and the Department of Economic Development to explore the introduction of an export tax on scrap metal,” Mboweni said. “The ordinary taxpayer is fully tax-compliant and pays their fair share. Paying your taxes is the right thing to do.”
State-owned enterprise restructuring
– Eskom used an additional R50 billion of its R350 billion guarantee in 2018/19.
– Denel was granted a further R1 billion guarantee.
– SAA guaranteed debt increased by R6.2 billion.
“In the State of the Nation Address, the President announced a clear and executable plan for electricity. At the core of this plan is the subdivision of Eskom into three independent components. This will set the electricity market on a new trajectory, and allow for more competition, transparency and a focused funding model,” the Minister said. “Pouring money directly into Eskom in its current form is like pouring water into a sieve.”
Eskom took on the debt, and must ultimately repay it. “We are setting aside R23-billion a year to financially support Eskom during its reconfiguration,” Mboweni said.
This 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.
“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,” Mboweni added.
Wage bill adjustments
“The public wage bill is unsustainable. We must shift expenditure to investment. National and provincial compensation budgets will be reduced by R27-billion over the next three years. The first step is to allow older public servants who want to do so, to retire early and gracefully. This will save an estimated R4.8-billion in 2019/20, R7.5-billion in 2020/21 and R8-billion in 2021/22. In time, this will be complemented by limits on overtime and bonus payments as well as pay progression. The system of staffing our diplomatic missions is unjustified and should be reviewed urgently,” Mboweni said.
As a gesture of goodwill to citizens, members of Parliament and provincial legislatures and executives at public entities will not be receiving a salary increase this financial year.
Improvements of conditions of life for all South Africans, especially the poor
In the fight against poverty and inequality, Government has allocated R567-billion for social grant payments. In 2019, the grant values will increase as follows:
– R80 increase for old age, disability, war veterans, and care dependency grants.
– R40 increase for the foster care grant to R1 000.
– The child support grant will increase to R420 in April and to R430 in October.
Access to housing
“Government continues to focus on supporting people to own their own homes. Funding totalling R14.7-billion over the two outer years has been reprioritised to two new conditional grants for informal settlements upgrading which will enable these households to have access to basic amenities,” the Minister said.