CAPE TOWN - Following today's taxing mini budget delivery by Finance Minister, Malusi Gigaba, we recap the 10 highlights you should take heed of.
1. EFF - We don't recognise Gigaba as a legitimate minister
The EFF disrupted the beginning of the mini budget and were then removed from the Parliamentary house.
The opposition party claimed that they did not recognise Gigaba as a legitimate Minister and associated him with the notorious Gupta family.
They managed to hold up proceedings for an estimated 15 minutes.
2. Some 'slippage' in tax compliance - Gigaba
While most SA taxpayers were "responsible", government was noting a "slippage in compliance", said Gigaba.
"SARS has enforcement powers, which are in the main punitive and this will be applied to taxpayers, who willfully and cynically avoid paying their taxes. However, SARS also remains sensitive to taxpayers, who are facing challenges.SARS is also aware of the major problem of illicit financial flows".
3. Govt will dispose of some Telkom shares to avoid expenditure breach
Government will dispose of some of its “well-performing” shares in fixed and mobile operator Telkom. This follows an effort to avoid a R3.9 billion breach.
Government’s share in Telkom is estimated to be worth between R14 billion and R20 billion.
Gigaba said that the expenditure ceiling could be breached by R3.9 billion in the current year, as a result of government’s recapitalisation of South African Airways and the South African Post Office.
“We aim to avoid a breach of the expenditure ceiling this year through the disposal of assets", Gigaba said during his mini budget speech.
Gigaba added that the Telkom shares would be sold with an option to buy back at a later stage.
4. Budget reaction
"In the coming days, talk of the looming fiscal cliff – where government debt spirals out of control – will again take centre stage," he said, as Gigaba's mini budget speech was still ongoing, said Ruaan Van Eeden, managing director of tax and exchange control at Geneva Management Group.
"Finance Minister Malusi Gigaba painted a gloomy picture in his mini budget. South Africa is caught in a low-growth trap.Instead of a slow recovery, with 2017 being the turning point, SA slipped into a technical recession in the second quarter of the year and was subjected to several credit ratings downgrades. The hard truth is that the growth recovery Treasury had hoped for has not materialised – largely because the policy uncertainty that scares off investors has continued", said Van Eeden.
5. Rand takes a dive
The rand took a dive after Finance Minister Malusi Gigaba began his budget statement.
Prior to the start of the of the speech the rand to dollar was at 13.74. The rand stands now 13. 93.
South Africa slashed its projected gross domestic product (GDP) growth forecast for 2017 by almost half, from 1.3% forecast in the February budget to 0.7%, as a result of continued decline in business and consumer confidence that has gathered pace since 2014.
6. Unprofitable SOEs have become a ‘substantial’ risk on fiscus
South Africa’s unprofitable state-owned entities have become a fiscal risk for government, according to the 2017 mini budget.
“Several state-owned companies persistently demonstrate operational inefficiencies, poor procurement practices, weak corporate governance and failures to abide by fiduciary obligations. The risk here is substantial.”
Between 2011/12 and 2016/17, the combined profitability of the state-owned companies, measured by return on equity, declined from 7.5% to an estimated 0.2%, it said.
“A growing portion of their operating expenditure is funded through debt.
7. Growth outlook
Finance Minister Malusi Gigaba announced that the growth outlook was slashed from 1.3% to 0.7%.
The predicted revenue shortfall is predicted to stand at R50.8bn. This is the largest shortfall since 2009.
He said that South Africa is working toward achieving the National Development Plan (NDP), vision 2030.
Currently, the country remains elusive, given the current economic forecast.
8. Higher education
Despite South Africa's ruling party, the African National Congress, earlier this year vowing that free higher education could become a reality as early as 2018, today's medium-term budget policy statement (MTBPS) revealed glaring gaps in funding for the country's students.
"If NSFAS were to cover the full cost of study for the 30% of undergraduates who currently qualify, the scheme would require R10.7 billion in the 2018 academic year, in addition to the R11.4 billion currently available", National Treasury said.
Covering all TVET students would require an additional R7.1 bln in 2018, which would accumulate to R23.5 billion over the next three years.
9. Ports of entry
Within the local context, Kenya and Ethiopia's growth forecast spikes positivism.
With an expected 5% renewed growth for Kenya and 8.5% for Ethiopia by 2017, this is considered to substantially improve the country's regional trade.
Gigaba added that the Department of Home Affairs is currently working on improving ports of entry (POE) in South Africa.
Renewed infrastructure is in the pipeline to revamp these ports of entry.
The Minister added that this will expectantly improve the country's trade.
10. Gigaba thanks Zuma
Gigaba has finished his speech by thanking President Jacob Zuma.
"President Zuma, thank you for your guidance and leadership," he said.
"Deputy President Ramaphosa, thank you for your encouragement. I would also like to thank my Cabinet colleagues, members of the Ministers’ Committee on the Budget and the Presidential Fiscal Committee for their cooperation and support".
- BUSINESS REPORT ONLINE