Mixed bag of fortunes, hits and misses
The market took the 2017 budget speech in its stride — even though the proposed hike in withholding tax on dividends to 20% might have irked investors.
The JSE all share index firmed slightly after the reading of the budget speech — though it still finished the day down. On the currency front, the rand weakened slightly against the dollar.
Ashburton Investments portfolio manager Wayne McCurrie says there were no surprises in that tax hikes were largely expected. “What was unusual was the tax increase on people earning over R1.5m a year. We initially thought it would come in at 43%, and not the proposed 45%.”
McCurrie says that overall the budget speech sent out the right messages. “It will be well received by the market and ratings agencies.”
Remgro CEO Jannie Durand believes finance minister Pravin Gordhan made the best of a difficult situation. “Having to commit to a high percentage of social spending in an economy that is not growing is difficult. It was a case of damned if you do, damned if you don’t.”
Durand argues that the decision not to increase the Vat rate meant a continuation in the concentration of the tax burden on a section of the population. “This is a bit of a concern . . . high earners are often very mobile.”
Retail tycoon Christo Wiese — whose major shareholdings include retail giant Shoprite, international conglomerate Steinhoff and investment group Brait — says at first glance there was nothing really negative in the budget speech, which reiterated President Jacob Zuma’s call for radical economic transformation.
He says government needs to understand that people who are perceived to be “well off” have no difficulty in making fair contributions, and in different ways, to ensure a better life for all. “We all agree that more money needs to be spent on education. But the output is dismal . . . despite government spending on education being one of the highest proportions of GDP in the world.”
Consideration should be given to allow the private sector to play a bigger role in delivering quality education.
“Such an initiative would save government money while enhancing quality of output,” Wiese says.