Belt-tightening Budget will affect everyone

FINANCE Minister Malusi Gigaba stole the limelight this week when he tabled the national Budget for 2018 in Parliament and announced punitive belt-tightening measures aimed at keeping credit ratings at bay.

The Budget was hailed as prudent by some, while others characterised it as a “smack in the face” of millions of poor South Africans who are unjustifiably made to pay for a string of economic sins committed during Jacob Zuma’s disastrous tenure as president of South Africa.

In his Budget speech, Gigaba said the national government, under newly elected President Cyril R a mapho s a , wo u l d reduce expenditure by R85 billion in the next three years, and that VAT would go up by one percentage point to 15%.

While this move was described as regressive by trade unions and industry bodies, among others, it would bump an extra revenue of R23bn into state coffers.

He also planned to raise R13bn through personal income tax. The Treasury said while the reductions in spending would cause economic discomfort, they were a necessary evil.

Other punitive measures which formed part of Gigaba’s delicate balancing act were an increase of 52c in fuel levies, with 22c/litre for the general fuel levy and a 30c/ litre rise in the Road Accident Fund levy.

Analysts

warned

the increase in the fuel levies would impact the low-earning commuters as taxi associations had already alluded to increasing their operational costs.

Gigaba revised the 2017 gross domestic product growth projection from 0.7% projected in the medium-term Budget policy statement – which he presented in October – to 1%.

The government anticipated an economic growth of 1.5% in 2018, 1.8% in 2019 and 2.1% in 2020.

Banking Association of SA managing director Cas Coovadia said under the present “difficult circumstances”, the Budget was fair and “seeks to fairly distribute the hardships that now face us as a country”.

He said the 1% increase in VAT would drag on consumer spending, “a major source of economic activity in South Africa”.

Gigaba said R57bn had been allocated to fund fee-free higher education over the medium term.

The National Treasury said 18.1 million South Africans would be receiving social grants by 2020.

Gigaba said old- age, disability and care dependency grants would go up by R90 to R1 690 and by a further R10 on October 1, while child support grants would increase by R20 to R400 and rise to R410 on October 1.

He also announced a tax that would see smokers paying R1.22 more for a packet of 20 cigarettes, and drinkers 15c more for a 340ml can of beer, R4.80 more per 750ml bottle of spirits and 28c more per 750ml bottle of “fortified wine”.