Minister treads fine line between give and take

MOST middle-class South African consumers will view Wednesday’s Budget speech positively: the Finance Minister did not announce any new taxes and, if their income increased by less than 5%, they will enjoy a decrease in their annual income tax bill. However, spare a thought for people surviving on social grants, and for employees in the public sector, who may not be quite as enamoured by what the Minister had to say.

André Wentzel, solutions manager at Sanlam Retail, says the above-inflation personal tax relief of R2.2 billion is particularly positive.

“Many were expecting the worst when it came to tax increases, given that we currently have the largest tax shortfall on record. We applaud the government’s considered approach, which should help to reduce the tax burden on lower and middle-income households.”

Wentzel says the tax relief gives South Africans a chance to take a deep breath and reprioritise their finances.

“Now is the time to re-examine money matters and cut expenditure where possible.”

Ernest Zamisa, financial adviser at Momentum Financial Planning, says the Budget should brighten the mood of consumers so that they become more confident in investing and in participating in the economy.

“It’s a ‘people-conscious’ budget, with a long-term positive outlook towards public and private development sector opportunities.

“The speech is consistent with previous Budget speeches that have been focused on development and embrace technology, transformation and environmental consciousness,” Zamisa says.

Another adviser at Momentum Financial Planning, Janine Horn, says: “It’s a tough period for South Africa, due to the pandemic, which has taken its toll on consumers and business owners.

“The economic downturn certainly means consumers are fragile and frustrated; however, the minister’s budget is optimistic and positive.

“Regarding personal tax, with a decrease one would expect household finances to improve.

“I would encourage households to reassess their budgets, decide on a strategy and stick to it.”

More good news is that National Treasury has committed to reviewing the rules around travel and working from home. Sage’s tax expert, Yolandi Esterhuizen, says: “I’m excited about the fact that Treasury plans to review the current travel and home office allowances, starting with consultations during this year and next.

“With more people working from home, and the remote working trend likely to outlast the pandemic, it is time to start aligning tax deductions for employees with the realities of a new world of work.”

INVESTMENTS

Chantal Marx, investment research head at FNB Wealth and Investments, says it was a good Budget from a market perspective.

“The minister has perfected the art of striking a delicate balance of being both bond and equity friendly. The rand strengthened, bond yields fell and the equity market held up well. A decline in bond issuances will be positive, as it indicates that government expects its lending requirements to come down,” she says.

Regarding retirement fund investments, National Treasury will publish draft amendments to Regulation 28 of the Pension Funds Act to make it easier for retirement funds to increase investment in infrastructure.

“This suggests that investment in infrastructure projects will be optional and not prescribed, as feared by some,” Marx says.

Prabashini Moodley, managing director of Old Mutual Corporate, says that while the financial services industry waits to see the proposed amendments, “increased investment exposure to infrastructure projects could lead to better outcomes for all South Africans saving for retirement.

“Infrastructure assets offer members decent diversification, particularly in the context of the comparatively small local equity market.

“They deliver inflation-beating returns over the long run if properly structured and properly managed,” Moodley says.

She says increased private sector investment in infrastructure could unlock long-term benefits for the country and investors alike, and will be a catalyst to stimulate the economy.

BAD NEWS FOR MANY?

Several aspects of the Budget will have come as bad news to government workers, people who depend on social grants, and the millions who commute via taxi: social grants rising by a paltry 1.6%, the increases in the fuel levies, and Treasury’s intention to virtually freeze public sector wages for the next three years.

Aisha Pandor, chief executive of domestic worker services agency SweepSouth, says: “The increase in the fuel levy will profoundly impact South Africa’s poorest workers (many of whom have to travel long distances to work), who will be subject to likely heavy increases in public transport costs as a result.”

John Manyike, head of financial education at Old Mutual, sees the rationale behind cutting the public sector wage bill, but says it will come with “a lot of casualties”.

“In the last few years we have seen labour being able to negotiate wages above inflation, to a point where we saw public servant salaries outpacing those of the private sector. But those years are gone; we are now in a position where it is simply not sustainable.

“The challenge is that we’re going to see a showdown between government and the public sector unions, who are saying, okay we hear you, but what about the rising costs of living?

“Can you imagine when teachers, nurses, and policemen and women are under pressure. What’s going to happen to the quality of service?

“I think there will be knock-on effects: we might see a series of strikes and damage to property.

“It’s really a case of having consultations in good faith with the unions. It would be dangerous to discuss this in the public domain without prior consultation.”

HEALTH CARE

Given the focus on health in the midst of the pandemic, there was no mention of the controversial National Health Insurance (NHI) initiative.

Damian McHugh, head of marketing and sales at Momentum Health, says: “It’s a long time since we have not heard NHI mentioned in a Budget speech, and that’s probably because there are other pressing matters.

“The minister did mention quite a few times about public and private working together (in other contexts). So maybe there is an opportunity for the private healthcare sector to partner with the public sector and work towards a health system that works for all South Africans.

“The pandemic has seen a focus on health, and what has been demonstrated is that when we work together, the results are quick and we can achieve very good things, and it shows that NHI doesn’t have to be at the expense of the private sector.

“We can use what we have learned in the pandemic for the long-term health of South Africa, and that includes the NHI model.”

I’m 45 and behind on my retirement savings. Is all hope lost?

Name withheld

Nirdev Desai, the head of sales at PSG Wealth, responds: At age

45 it is expected that you should have saved about four times your annual salary, but many of us don’t even have that much when we retire. All is not lost if you are behind, but it will take a serious commitment to catch up. Think about the retirement lifestyle for which you planned when you were in your 20s and 30s. If your expectation of your future lifestyle has changed fundamentally, you will have to adjust your retirement plan urgently to meet these new requirements. You may need to be more realistic about what you can achieve, but you can also step up your game to change the outcome. I suggest urgently meeting with a financial adviser to craft a plan to help you catch up and get on track.

TOMORROW marks 339 days of lockdown in South Africa. While almost 1.5 million people have been infected by Covid-19 and 50 000 have succumbed to the virus, the arrival of the approved vaccines in the country have also brought a ray of hope and to date almost 40 000 people have been vaccinated.

Undoubtedly, the effects on the country have been devastating with unemployment rates reaching their highest level since 2008.

Yet, there has also been almost unanimous acceptance that science is the kingpin on which our recovery will be based. That South Africa has fared better than expected can equally be attributed to the fact that science has been at the heart of its response.

Globally, virologists, immunologists, vaccinologists and public health specialists have stepped up to the proverbial plate and in an unprecedented development, we now have a number of vaccines that will provide us with a large degree of protection.

Although the immediate causes of our problems are biological, the effects are social and the solutions lie at the crossroads between the medical and behavioural sciences.

Less visible but no less debilitating are the social trauma and strains into which untold numbers have been thrust, unspeakable emotional breakdown, unsupported grief and depression, family strife, community dysfunctionality, more and more gender-based violence and other – and let us be blunt about this – social pathologies which we do not know enough about.

Social scientists also sprang into action from the earliest days of the first positive diagnosis in South Africa. Days after the lockdown came into effect, the Human Sciences Research Council (HSRC) initiated two different survey series to establish what South Africans thought, their attitudes to the mitigation measures proposed and their trust in government.

HSRC researchers and the University of Johannesburg have, through their successful partnership, also conducted three waves of surveys looking at attitudes, perceptions and behaviours of South Africans in respect of the pandemic and mitigation measures. At the same time, an HSRC-led survey conducted with academics in the education sectors of 70 countries, including 13 African countries, found strong correlation between poverty and deprivation from electricity, data, devices and the lack of conducive learning space.

As these surveys were being conducted, teams of researchers from the Universities of Stellenbosch, Cape Town and the Witwatersrand began working on the effects of the pandemic with respect to employment, household income, child hunger and access to government grants. The results from their Coronavirus Rapid Mobile Survey (Crams), have critically informed the government’s response to the lockdown.

Simultaneously, many universities and science councils, including the HSRC, took the initiative to hold public engagements about the pandemic, effectively bringing science to the people.

Many academics also joined civil society initiatives to deal with emergencies in stressed communities. This included land and agrarian reform researchers and civil society activists making submissions to the Food and Agriculture Organisation and hosting dialogues with government on how to create resilient, sustainable and inclusive agro-food systems.

Understanding the complexity of the pandemic and its impact, the indispensable role of the medical and social sciences in forging the solutions we need, the ministerial advisory committees for the pandemic and for vaccinations have come to include social scientists.

In this trans-disciplinary vein, the HSRC has also led a multi-stakeholder team of medical and social scientists to conduct the national Covid-19 antibody sero-prevalence study to ascertain levels of antibodies in the South African population.

South Africa’s response to the pandemic, and how the medical and social scientists have stepped up to the plate, signals the awareness of trans-disciplinary approaches to dealing with crises.

Taking the lead, as public health researchers will at this time, there is growing acknowledgement that social scientists have to be present from the very beginning of an issue and will, in the appropriate circumstances, be given leadership responsibility. This is crucial.