CAPE TOWN - Finance Minister Malusi Gigaba is set to deliver his maiden Budget Speech at 2:00pm today. The speech is expected to address the country’s economic state and strategies of reform.
Take a look at some of the key areas that will be addressed in the budget which impacts every South African.
In his maiden Medium Term Budget Speech, Gigaba said that South Africa currently faces a tax revenue shortfall of a staggering R50.8 billion. The country’s economic woes need to be addressed urgently and the expected Budget speech will do just that. However, analyst and Head of Corporate Finance at Bravura, Soria Hay on Monday said that in order to get the country back on track and stabilise its debt, taxes will have to be increased.
This is one manner in which the country can level the current deficit.
Meanwhile, Chief Economist at Investec, Annabel Bishop said that “excessive indirect and direct tax hikes could strangle economic growth”.
According to Bishop, SA is only expected to see economic growth of around 1.5% y/y this year, and slightly higher next year as many areas of SA’s previous institutional strengths need to be repaired.
Former President of South Africa, Jacob Zuma this year announced that South Africa will provide free education to the deserving poor. This is expected to be rolled out over a five year span. Zuma also said that existing qualifying students with existing debt will have their loan converted to a 100% bursary.
However, the country is reportedly facing a R40 billion deficit to provide free education.
Meanwhile, Deputy Higher Education and Training Minister Buti Manamela said in January that deserving students will receive free education.
According to Manamela, Zuma's announcement was not made haphazardly, but was researched by the higher education, finance, science and technology and state security departments after the Heher Commission had completed its investigation on the matter.
He said Gigaba would announce, during his budget speech, where the free education funding would come from.
South Africa has already suffered junk status from two ratings agencies. The country’s debt is out of balance and Gigaba said in November last year that SA will cut spending by R25 billion.
This implementation was revealed in Cape Town’s Parliamentary house, in a desperate attempt to constrain growing debt.
Gigaba also last year revealed plans to raise revenue by R15 billion in today’s budget.
Gigaba said that these plans were in a desperate bid to constrain growing debt, of which has been flagged by ratings agencies for the past few years.
Gigaba said that the extra R40 billion (0.8% of the GDP) would be utilised to tackle rising public debt. If not addressed now, this could escalate beyond 60% of the GDP by 2022.
The World Bank said last month that South Africa’s economy is expected to grow by just 1.1% in 2018.
This is one of the lowest growth rates in sub-Saharan Africa.
This was revealed in the bank’s annual global economic outlook.
Structural reforms could however be slowed down, said the bank as a result of persisting policy uncertainty.
According to Statistic’s SA’s 2017 data, 16.5 million people from a population of 51.8 million are recipients of social assistance grants. These social grants are expected to increase during the 2018 financial year.
Grant recipients currently receive the following:
- Old age grants payment of R1600 for pensioners over the age of 60, and R1620 for those over 75.
- The disability and care dependency grants of R1600 a month.
- Foster care grants of R920 a month.
- The child support grant of R380 a month.
The looting spree that seemed to be systematic with the Zuma era targeted state-owned entities (SOEs) such as Eskom. The state utility is currently at risk of running out of cash and is under review.
One of Ramaphosa ‘s first steps was the appointment of a new board at Eskom but he has yet to appoint a permanent chief executive. He also has to assist in appointing a number of top management positions. The new commander in chief has to then raise a large amount of funding for Eskom.
While Eskom may be the most urgent SOE in crisis, SAA, PetroSA and a number of other entities will need his attention. What seems to be the most urgent issue is new leadership.
In the 2017 Budget Speech, government addressed key implementation measures to ensure that small and medium sized enterprises thrive in the economy.
- Earmarking R3.9 billion for small, medium and micro enterprises over the next three years.
- Plans to provide 2000 companies in this category with support from the Black Business Supplier Development Programme.
- An above-inflation increase to the Department of Small Business Development’s total Budget allocation up to 2019/20.
More emphasis and implementation on these plans are expected to be addressed today.
14 Point plan
Gigaba last year outlined a 14 point plan to wrench the economy out of recession.
The 14-point action plan aims to lift the economy to a higher growth path through rebuilding business confidence and to staving off the risk of a downgrade on local bonds.
The plan incorporates the following:
1. Fiscal policy
2. Financial sector and tax policy
3. Leverage public procurement
4. Recapitalisation of SOE’s
5. Broader SOE reforms
6. Private sector participation (PSP) Framework
7. Costing developmental mandates
9. South African Airways
11. Postbank licensing
12.Minerals and Petroleum Resources Development Act Amendment Bill
13. Broad-based Socio-Economic Empowerment Charter for the South African Mining and Minerals Industry
14. The Regulation of Land Holdings Bill
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