The good and bad of the budget speech

Finance Minister Enoch Godongwana delivered the 2024 Budget Speech in Cape Town on 21 February. Being finance minister is not a job I envy, especially considering South Africa’s shrinking tax base and rising unemployment; the books are becoming more and more difficult to balance.

There have been some mixed responses from economists on the budget speech, particularly as it pertains to goverment announcing that it would be dipping into the country’s Gold and Foreign Exchange Contingency Reserve Account to help plug the tax shortfall.

Government will tap into R150 billion of the country’s R500 billion reserve over a three-year period “with a further ‘allocation” of R100 billion to support the South African Reserve Bank,” Moneyweb reported.

While tapping into the reserve will allow government to reduce borrowing, taking money from this account is a risky move that also seems like a last resort for the ruling ANC government, particularly in an election year, during which an increase in taxes, such as VAT, would have been unthinkable.

And this is one of the major problems with government being controlled by political parties that win elections: this move by National Treasury may not be in the interests of South Africa over the long term, but is beneficial for the ANC in an election. What may have been in the best interests of the country would have been cutting state expenditure on public wage increases, which increase on an annual basis at a higher rate than inflation.

What may have been more beneficial to the country in the long term would have been the scrapping of pie-in-the-sky ideas, like the National Health Insurance, which Godongwana gave R1,5 billion (albeit far short of the around R200 billion it has been estimated to need to get off the ground).

Godongwana also announced that there would be no increase in personal income tax. However, tax brackets will not be adjusted for inflation, so those who generate slightly more income this year may be pushed into a higher tax bracket, which will result in those people paying more taxes.

Unfortunately for South Africa’s battling liquor industries, sin taxes have been increased. A 340ml can of beer will cost 14c more, a 750ml bottle of fortified wine will cost 47c more, a 750ml bottle of wine will cost 27c more and a 750ml bottle of spirits, such as whisky and brandy, will cost R5,53 more.

This increase is likely to add an extra burden to an industry already struggling with high input costs and failing infrastructure, making it more difficult for farmers and exporters to send their products abroad, which could offset some of the increasing costs at home.

Some good news for farmers and consumers, however, was no increase in the fuel levy or the Road Accident Fund levy. However, there will be a small increase in the carbon tax (I am still unsure of where this money goes or how it aims to offset carbon emissions).

There was also no mention of an increase in the Health Promotion Levy, which is good news for the country’s battling sugar industry. FW

Janine Ryan, Editor