Finance Minister Enoch Godongwana has delivered his Budget 2023 speech, with a key focus on taxation, Eskom and infrastructure.
This is another balancing act for Godongwana when it comes to the exact details of Eskom’s debt relief as well as renewable energy incentives.
He also highlighted the social wage, tax relief totaling R13 billion in 2023/24 to support the clean energy transition, and the continued impact of fuel prices.
Budget speech reaction
The business sector expressed optimism about the new budget, labeling it positive.
Here are some companies’ reactions:
Frank Blackmore, lead economist at KPMG
“The budget will certainly focus on infrastructure, especially looking at Eskom and what will happen with debt. And then also on other initiatives in terms of spending in the infrastructure space, including water and sanitation, as well as transport and logistics.
“Given the level of decay in all these areas; the budget does not disappoint in this regard,” he said.
Also read: Budget 2023: Civil servants to get R45.6 billion in wage increases
Blackmore said the budget was positive because it showed a strong infrastructure focus.
“Total spending of about 903 billion in the medium term will be carried out, much of which will be focused on state-owned enterprises. [We are seeing] amount of R448 billion in transport and logistics to receive R351 billion over the medium term period. Water and sanitation [will receive] R132.5 billion there, so that’s pretty good,” he said.
Blackmore said that what is good about the budget is that there are no major tax proposals in the budget based on the collection of more revenue than expected.
Tertia Jacobs, treasury economist at Investec
Jacobs says 2023 offers hope for Eskom’s dilemma.
“Budget 2023 has increased Eskom’s cash flow, allowing it to burn more diesel and confidently start its maintenance program and fixed investment,” Jacobs said.
They say this is a good thing because it mitigates some of the downside risks to GDP growth.
“The government has offered a staggered debt solution to address Eskom’s debt burden of R423 billion over the next three years. This will include loans, which will be converted into equity when the terms are met, and the transfer of debt in F25, totaling R254 billion,” he said.
Also read: Budget speech 2023: Tackling climate change and the energy crisis in SA
“This loan/equity, combined with the 18.65% rate increase, will reduce the cash flow pressure on Eskom and finance maintenance, new capex and burn more diesel. The latter could reduce the load down by two stages if Eskom continues to use OCGT extensively ,” she said.
Palesa Mabasa, business development head: SME funding at FNB
Mabasa believes that the finance minister gave good news to SMEs in his Budget speech.
“There are a number of support measures in place to navigate these challenging economic conditions,” he said.
“With the planned takeover of Eskom’s debt, businesses hope to have less of a burden as the resources that would have been used to repay the debt will now be used to focus on the maintenance of Eskom’s infrastructure.
“This will help SMEs to improve their bottom line because less load means more revenue and lower costs to run alternative energy solutions like fuel-free generators,” he said.
He also said that the change in the scheme was welcomed as SMEs would be able to finance their solar power needs with government guarantees.
Carmen Nel, economist and macro strategist, Matrix Fund Manager
Nel said the market received the 2023 Budget positively, which was seen in a near-20 basis point (bp) rally in the benchmark 10-year yield and a 20c gain in the rand against the dollar.
“While this is not a huge move, it signals a positive attitude or at least relief that the government is not changing its fiscal strategy,” he said.
Also read: 2023 budget speech: Civil organizations ask Godongwana not to cut social spending
“Finance Minister Godongwana tabled the FY23/24 Budget in parliament amid uncertainty over the fiscal trajectory, sustainability of Eskom, and the Financial Action Task Force (FATF) gray list.
“Importantly, the direction included in the medium-term budget policy statement (MTBPS) 2022 in October last year is one of continuous consolidation by generating a major budget surplus, which is less revenue than non-interest expenditures.
“This budget continues, with the combined budget deficit shrinking from approximately 4.2% of GDP in FY23 to 3.2% in FY26. Encouragingly, the government will generate a primary surplus of 0.1%/GDP a year earlier in FY23. A return to primary surpluss will contribute to the stabilization of the medium-term debt ratio,” he said.
He concluded that the Treasury team delivered a positive budget with some creative accounting.
Itireleng Kubeka, Managing Director, Tax & Legal at Deloitte Africa
Revenue collection has provided a good basis for the government to plan spending and help provide relief to consumers and businesses, but for the latter, this does not go far enough, Kubeka thinks.
“Deloitte notes that the relief provided to businesses does not go far enough,” he said.
Also read: National Budget 2023: All about taxes
Kubeka’s colleague, Olebogeng Ramatlhodi, director and leader of indirect tax at Deloitte Africa, pointed to the extension of the diesel fuel rebate for businesses in the food manufacturing sector, arguing that the rebate should be extended to other critical industries that currently use diesel. to counteract the effect of load shedding, such as telecommunications.
Citadel’s chief economist, Maarten Ackerman
Ackerman has mixed feelings about the Godongwana budget.
“Although it is a good budget considering our situation, there is a significant downside risk ahead,” he said.
He added that while the 2023 budget brings some relief to cash-strapped citizens, the new fiscal pressures caused by Eskom and the cost of living crisis, as well as the tax cap may also lead to the country’s debt risk if the economy is real. no growth this year