Finance Minister Enoch Godongwana delivered a solid and balanced budget on Wednesday and economists believe the market will react positively to the existing fiscal discipline. That’s as good as we can hope for, given the current state of the economy. Independent economist Prof. Bonke Dumisa said he was impressed with the budget, but noted that ministers spent little time on Eskom. He thinks that a 125% tax break for businesses installing solar panels is the right move, although a 25% cut for consumers is not here. “He tried to…
Finance Minister Enoch Godongwana delivered a solid and balanced budget on Wednesday and economists believe the market will react positively to the existing fiscal discipline. That’s as good as we can hope for, given the current state of the economy.
Independent economist Prof. Bonke Dumisa said he was impressed with the budget, but noted that ministers spent little time on Eskom. He thinks that a 125% tax break for businesses installing solar panels is the right move, although a 25% cut for consumers is not here.
“He tried his best by increasing the social fund and I appreciate him giving an additional R1.5 billion to the NPA to stop corruption. I wish there was more to give because the more confidence it will be easier to get money back from the proceeds of crime. Add in the fuel levy is also accepted, but the volatility of international crude oil prices will still cause us to be exposed.
Prof. Jannie Rossouw, visiting professor at Wits Business School, said the minister said what was expected. He said the government is giving tax breaks to consumers and businesses to generate electricity to ensure that load shedding is less of an issue during next year’s election.
“However, I am concerned about the public sector wage bill because we do not know what will happen if the government’s wage offer is rejected. What I hope is that more will be done to stop tobacco smuggling, because it generates a lot of revenue.
Also read: Government to shoulder Eskom’s R254 billion debt
A map to fiscal sustainability
Arthur Kamp, chief economist at Sanlam Investments, said the National Treasury has lifted the expected trajectory of government debt, but it is important to continue the path map for fiscal sustainability and lower government debt ratio in the long-term.
“However, the fiscal policy is not light in terms of its impact on the economy. Our country’s debt rating remains sub-investment grade. Therefore, the real interest rate is high and the government continues to absorb a large part of the available resources. If there is no strong flow of foreign capital, this limiting private sector investment and job creation.
Frank Blackmore, lead economist at KPMG, was impressed by the infrastructure spending Godongwana announced, as well as the main tax proposals based on higher revenue collection than expected which is even higher than the medium budget policy statement from last October.
“It is also good that the Treasury is committed to limiting the size of the public sector wage bill and increases. This is also a good signal for the international credit agencies and a sign of the fiscal constraints that we have been talking about for the past few years.
Tertia Jacobs, treasury economist at Investec, said the improvement in Eskom’s cash flow, allowing it to burn more diesel and confidently start maintenance and fixed investment programs, reduce some of the downside risks to GDP growth.
Johann van Tonder, group strategy economist at Momentum Metropolitan, said the good news is that the government has returned to concerns about revenue exceeding non-interest expenditure.
“This enabled the government to provide personal income tax relief for consumers, as well as incentives for consumers to buy solar panels, putting almost R20 billion back into consumers’ pockets. The minister also handled Eskom’s situation very well.
Hannes van den Berg, CEO at Consult by Momentum, said he was concerned about the upcoming gray list in the country.
“The minister’s closing comments indicate that this will become a reality, which will make overseas investment more challenging and impose a large administrative burden on the financial services sector.”
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Hope for SMEs but no support
Neil Roets, CEO of Debt Rescue, said that the minister gave hope to the business sector, but he was disappointed by the lack of emphasis on helping the SME sector, as they are the drivers of economic growth during the country’s existence. tipping point, spurred by the energy crisis and continuous fiscal challenges.
“The elephant in the room is the 30.3 million South Africans who are currently living below the poverty line and struggling to put enough food on the table, while facing an unprecedented cost of living catastrophe.”
Business Leadership SA said it is expected the country’s fiscal trajectory to weaken given the transfer of Eskom’s debt and while the high level of debt is a concern, this is necessary to help overcome the crippling effect of loadshedding.
“Tackling the energy crisis has always been at the center of this budget and Eskom’s R254 billion in debt is greater than expected, a recognition of the importance of freeing up funding for Eskom to operate more efficiently.”
Dr Elna Moolman, head of macroeconomic, fixed income and currency research at Standard Bank expects the financial market reaction to be neutral. “Investors will draw attention from the continuity of the general fiscal objectives and greater clarity on the fiscal impact of support for Eskom.”
However, he said, the fiscal risk remains and investors will certainly be concerned about the risk of falling to the trajectory of economic growth in the midst of an increase in burdens and a less supportive global economic background, as well as the risk of increasing spending on social grants, wages. and BUMN support.
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A clear human budget
Angelika Goliger, chief economist at EY Africa, said the budget was a clear human budget, with a lot of sympathy and some relief considering the current hardships due to the high cost of living, higher debt costs and the continuing burden without tax increases. and relief for households and businesses in the area.
“This budget also signals that the support South Africa has received from the global economic environment over the past two years will come to an end. The global economic environment is highly uncertain and volatile, with the moderating rate of global economic growth a hotly debated topic.
Jeff Miller, the founder of the Twelve B Green Energy Fund, said the minister should be congratulated on the foresight to increase the section 12B tax allowance from 100% to 125% for businesses that install solar.
“This move will give our investors an increased return from 14% to 18%, which is unbelievable for a moderate risk investment. The incentive is good for South Africa, for the Twelve B Green Energy Fund and the acquisition of renewable energy.
Garth Rossiter, chief risk officer at Lulalend, said that while the country has promised to be frugal with its national budget, South Africans have become more frugal with their household budgets.
“SMEs and entrepreneurs would be happy to see no big tax increase. However, the limited tax increase appears to be the result of efficient Sars operations, rather than economic growth.
He also noted that Godongwana’s speech indicated his intention to review and possibly reduce Eskom’s 18.65% tariff increase set for implementation on April 1.
“This year’s budget speech reflects the stark reality of South Africa’s current economic situation. However, despite the challenges facing the country, there are reasons for hope, including the emphasis on sustainable energy.
Dr Andrew Golding, CE of Pam Golding Property Group, found the welcome news that the transfer duty table bracket will be increased by 10 per cent, allowing properties under R1.1 million to avoid paying transfer duty.
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Support for food production is good news
Roelie van Reenen, supply chain executive at Beefmaster Group, said she was pleased to hear that the budget recognized the burden on South African consumers due to the electricity crisis, which highlighted the cost of food production.
“The government recognizes that food producers may have no other choice but to increase the cost of production to consumers who are already struggling, which they are trying to do in a targeted way. We are very happy that the government is planning to reduce the impact of the electricity crisis on food prices by extending the refund of the Road Accident Fund to food producers.
Kulani Siweya, chief economist at Agri SA, said the government could go further to address the challenges facing the agricultural sector, the budget reflects an analysis of the economic environment and an understanding of the specific difficulties facing the sector with significant implications for food security.
“Agri SA also acknowledges the measures taken to help the agricultural sector as the government works to make Eskom stronger. Of particular note is the extension of the Road Accident Fund levy rebate for solar used by food producers. This intervention will help reduce the cost of food production to obtain benefits of consumers.