Speech bolsters confidence of local business
• Opposition parties and labour doubtful about economic plans
Finance minister Enoch Godongwana’s budget speech on Wednesday bolstered business confidence. But with the 2024 general elections fast approaching, organised labour and opposition parties were quick to cast doubt over the ANC-led government’s economic plans.
“The minister has made it very clear that the overall strategy is to encourage economic growth, protect the economy and ensure the overall fiscal environment is stable,” Business Unity SA’s Cas Coovadia said. Busa was happy about Godongwana’s clarity on the need to open up the economy, he said.
“He has indicated that there is, and must be, much more space for the private sector to work with the government to more effectively run critical nodes in infrastructure, logistics and energy,” Coovadia said.
The rand, which has in recent years largely responded negatively after the budget speech, showed some positive indicators. Before the speech it was slightly weaker at R18.92/$. But as the minister spoke it began to firm. By 5.15pm the rand was at R18.83/$.
While the markets warmly received the budget, the liquor industry warned the aboveinflation rise in sin taxes would give rise to the growth of the black market in the sector.
Godongwana increased tax on a can of beer and cider 14c each and 28c on a bottle of wine. A bottle of spirits, including whisky, gin and vodka, will cost R5.53 more in taxes, and electronic delivery systems (vapes) tax will increase R3.04/ml. A pack of cigarettes will cost 97c more in taxes.
ILLICIT ALCOHOL
Wine growers have faced tough years, with sales bans in 2020 and 2021, and load-shedding and rising fertiliser prices increasing costs, while the disruptions at the Port of Cape Town delay exports. The wine industry argues that there is a large, growing market for illicit alcohol, which provides consumers with access to more affordable alternatives but could be more harmful.
The 2023 results from the world’s second-largest brewer, Heineken, released last week, show its SA operations, which include Windhoek beer, Savanna and 4th Street mainstream wine, recorded single-digit revenue declines.
“When prices rise faster than incomes, people can afford fewer goods and services. Cheaper goods, including illicit and blackmarket products, become more tempting,” said industry body SA Wine’s stakeholder engagement manager, Christo Conradie.
Cosatu, a labour federation and ally of the ANC, was not amused by Godongwana’s budget.
“The Treasury treated the budget as little more than a bean-counting exercise and failed to seize the moment to respond decisively to the myriad challenges workers, society, the economy and the state are facing,” said Matthew Parks, acting national spokesperson of Cosatu.
“The reason we are in a crisis the economy is not growing and unemployment remains dangerously high. The growth in debt is a symptom, not a cause, of this.”
Parks said the solution was to stimulate the economy, reduce unemployment, provide relief to the poor, rebuild the state and tackle crime and corruption. He supported the agreement to release R150bn from the Gold and Foreign Exchange Contingency Reserve Account “to ease the fiscal pressures”.
“It is critical these reserves be used strategically to stabilise and rebuild Eskom and Transnet in particular, as this can only be a one-off relief and needs to be utilised to grow the economy and reduce unemployment,” he said.
ELECTIONEERING BUDGET
Opposition political parties expressed disappointment at what they called an “electioneering budget”. They took issue with the government’s decision to “raid” R150bn from the contingency reserve account to help improve fiscal prospects, saying this could undermine the credibility of monetary policy.
DA finance spokesperson Dion George said the budget was another indication of a “panicking ANC government that has no plan to accelerate economic growth, resolve relentless blackouts, stabilise debt, reign in runaway expenditure, support vulnerable South Africans and combat corruption”.
UDM deputy president Nqabayomzi Kwankwa described it as an “electioneering budget” and blamed the ANC government for “mismanaging the economy”. IFP MP Mzamo Buthelezi dismissed Godongwana for saying “all the nice things people like to hear”.
Freedom Front Plus leader Pieter Groenewald said SA was in “big trouble” and warned people against being misled by the budget speech. EFF chairperson Veronica Mente said the ANC lacked “a plan on how you grow the economy” or provide service delivery.