The national budget speech will be delivered by finance minister Enoch Godongwana, according to the National Treasury, in an effort to achieve a compromise between the national government’s spending goals and the available resources.
The minister requested input from South Africans on the budget at the beginning of this month, asking them to address issues such government spending priorities, municipal finances, the significant budget deficit, stabilising state-owned enterprises, handling the energy situation, and tax collections.
Godongwana has a challenging situation as internal and international events make it challenging to reconcile various requirements in the fiscal policy, particularly since economic growth forecasts for South Africa are significantly lowered as a result of ongoing rolling blackouts.
The most significant aspect of the budget, according to Busi Mavuso, CEO of Business Leadership South Africa (BLSA), would certainly be a solution to Eskom’s R400 billion debt problem
“There has been a lot of discussion about taking over a significant portion of Eskom’s debt. Last year, the finance minister stated that the economy and public finances are most at risk from Eskom’s performance during his medium-term budget policy announcement,” Mavuso said.
Many would appreciate more information in this year’s budget addressing how the government would encourage the installation of rooftop solar in homes as well as the tax incentives for companies regarding self-generation and feeding back into the grid.
Government wage bill: The wage bill, which accounts for a third of government expenditure, has been highlighted by economists and experts as the largest budget risk, with even the slightest departure from the projected spending possibly having catastrophic effects. The wage bill has a history of being a touchy subject. If requests for a 10% or more rise are not satisfied, public employees who have not seen a big boost in several years are threatening to strike.
Taxes: Watch out for changes to the tax rates, as well as increases to sin taxes, gasoline taxes, and other levies such as the charge for plastic bags, emission levies, etc. Although the South African tax base is already under a lot of strain, economists do not anticipate any big tax revisions — or the introduction of new levies. Increasing taxes runs the danger of tipping the nation over the Laffer Curve and encouraging tax evasion or a “tax revolt.” As a result, it is doubtful that the value-added tax (VAT) will increase, a wealth tax will be implemented, and the personal income tax rates won’t be increased either.
Tax benefits and energy solutions from solar: The implementation of tax incentives for solar is a significant tax reform that deserves separate attention. The implementation of this legislation will be closely watched by companies and households since President Cyril Ramaphosa promised that Godongwana will go into depth about it during his speech. The best-case scenario, according to others, would be a refund given to homes that could be used to any deductible income for all solar system components, including installation.
Social grants: Momentum predicted that the so-called social wage will be raised to benefit the underprivileged. The free universities, free water, free electricity, free education, free health care, the social relief award (now R350 per month), and other social benefits are examples of this.
Eskom debt: Treasury aims to take over one- to two-thirds of Eskom’s R400 billion-plus debt, and is now putting up investor meetings for directly after the speech to answer any questions and concerns about it. The precise amount of debt being assumed, the timing and method of doing so (all at once, or phased), as well as the tight terms tied to the agreement – i.e., what will be required of Eskom to ensure it doesn’t just wind up in the same situation – will be of interest to the markets. Treasury must exercise caution and make sure that the transfer does not result in defaults, rating downgrades, or other issues connected to Eskom’s financial problem, Future-growth Asset Managers have cautioned.