What financial experts had to say about the Budget

BUDGET 2023

Arthur Kamp - Chief Economist, Sanlam Investments

Budget 2023 is as good as we could have hoped for, given current economic conditions. The National Treasury has lifted the expected government debt trajectory, but, importantly, it continues to map a path to fiscal sustainability and a lower government debt ratio in the long term.

ESKOM CRISIS

Christie Viljoen – Senior Economist, PwC South Africa

South Africa’s power challenges are severely affecting economic growth and jobs at a time when the country urgently needs to recover from the after-effects of the Covid-19 crisis to retain its competitiveness and attractiveness. Indeed, load-shedding is the number one brake on economic and employment growth. As reported in our January 2023 South Africa Economic Outlook, PwC estimates that power cuts reduced potential real GDP growth by five percentage points in 2022. This cost the country around 600 000 potential jobs. The channels of negative impact on the economy are diverse, including: weaker consumer confidence weighing on retail spending, lower business confidence impacting investment decisions, and tainted international perceptions limiting foreign investment. Looking beyond GDP, society also faced increased crime risk due to off-line security systems, longer journeys linked to delayed transport, and unreliable communication from slower mobile telecommunication services, amongst other issues.

Casey Delport – Investment Analyst, Fixed Income, Anchor Capital

Government debt is now forecast to peak at around 73.6% of GDP, with the higher peak mainly owing to R254bn of relief for Eskom. While the debt relief arrangement for Eskom may seem a significant move at first (and it is, by no means, a small number), in National Treasury’s own words, it is simply a “balance sheet transaction”.

As such, it does nothing to actually assist in rectifying the deep structural issues that plague the state-owned entity.

TWO-POT RETIREMENT SAVINGS John Anderson – Executive: Investments, Products and Enablement, Alexforbes

The Minister of Finance announced that the proposed two-pot system will take effect on March 1, 2024. Many had hoped for a delayed implementation date, given the development required to systems to accommodate the new structure. Overall, Alexforbes is supportive of the changes – over the long-term the outcomes of retirement members are much improved. In the short-term, however, there will be pressure on administrators to process significant amounts of small claims, given that a portion of accumulated savings to March 1, 2024 will be immediately accessible.

It is therefore imperative that retirement funds ensure that they can accommodate the changes, including: significant changes to systems, making use of the latest technology in engaging members; investment strategies to cater for the various pots; and member communication and support to members to ensure members understand their options under the new system. A further implication may be that free-standing funds consider moving to umbrella funds which would cater for the changes.

CORPORATE INCOME TAX

Carla Rossouw – Head of Tax, Allan Gray

Similar to last year, Corporate Income Tax (CIT) collections continued to be higher than expected, particularly owing to price increases in key commodities such as mining and manufacturing. While CIT windfalls assist in managing the books, this is not sustainable.

We have already seen the profitability in the resource sector declining, leading to lower CIT tax revenue forecasts, and we are yet to experience the full impact of loadshedding on the country’s economic activity and the significant risk it poses to CIT revenue collection. It therefore comes as no surprise that tax revenue is expected to decline.

PROPERTY TRANSFER DUTY

Carl Coetzee – Chief Executive Officer, BetterBond

We welcome the announcement in the National Budget, where it was said that properties of up to R1.1 million are now exempt from transfer duty. This is 10% up from the previous R1 million. This bodes well for firsttime homebuyers especially, by making it easier for them to get a foot on the property ladder.

ESTATE PLANNING

Jeffrey Wiseman – Chief Executive Officer, Momentum Trust

The good news is that most of the tax changes came about in form of tax relief and, from a state planning point of view, the fact that no changes were announced to things like estate duty or capital gains tax, which are normally associated with wealthy individuals who look at using structures to plan their estate. The fine print indicates that SARS is looking more carefully into some planning structures that individuals seem to use to exploit what SARS will consider loopholes in the legislation, so there are definitely going to be measures taken to tighten up some of those shortfalls, which will include slight changes related to low-interest loans to trusts and some changes to the taxation of distribution from trusts to non-resident beneficiaries.