For consumers, Finance Minister Tito Mboweni’s medium-term budget policy statement (MTBPS) on Wednesday may have brought home some of the realities about South Africa’s economic situation, but it did not, as some analysts predicted, place a heavier burden on taxpayers.
Growth forecasts were down, and the government is facing higher revenue shortfalls than previously thought. However, Mboweni looked to change things from within rather than relying on taxpayers.
Kwaku Koranteng, the head of institutional business at Absa Multi-management, says: “The MTBPS was an honest reflection of the situation in South Africa. The government is committed to clamping down on corruption and inefficiencies, and restoring state-owned entities to health.”
National Treasury forecasts that gross domestic product growth will slow to 0.7% this year, down from 1.3% in 2017, before rising to 1.7% next year and 2.1% in 2020.
Revenue shortfalls have widened over the past four years, with under-collections rising from R7.4 billion in 2014/15 to R49bn in 2017/18. The MTBPS announced that there will be a revenue shortfall of R27.4bn relative to the 2018 Budget estimate.
Kemp Munnik, the head of structured solutions at investment bank Bravura, says Mboweni has sought to avoid increases in taxes 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,” he says.
In an info-graphic released on Wednesday, Momentum Investments says there is little “wiggle-room” for the minister to increase taxes further.
For consumers, there is no immediate bad news:
* VAT-exempt items have been expanded to include white bread flour, cake flour and sanitary products from April 1, 2019;
* The date for the implementation of the carbon tax has been pushed out from January 1 to June 1, 2019;
* The tax increases that are likely to emerge in the February 2019 budget include taxes on alcohol and tobacco-related products, and limited compensation for bracket creep;
* There was no announcement on potential fuel-price caps despite an investigation indicating that further large fuel levy increases will be required to manage the short-term liability of the Road Accident Fund;
* There will be real (after-inflation) growth in social grants (between 2% and 3% in the medium term) to help cushion the burden on low-income households;
* There will not be mass layoffs in the public sector; and
* The Jobs Summit aims to create 275 000 jobs every year for the next five years.