JOHANNESBURG - Finance Minister Malusi Gigaba stole the limelight this week when he tabled the national Budget for 2018 in Parliament where he 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 Ramaphosa, would reduce expenditure by R85 billion in the next three years, and that Value Added Tax would go up by one percentage point to 15 percent. 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 52 cents in fuel levies, with 22 cents a litre for the general fuel levy and 30 cents a litre rise in the Road Accident Fund levy.
Analysts warned that 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 percent projected in the medium-term budget policy statement - which he presented in October - to 1 percent. The government anticipated an economic growth of 1.5 percent in 2018, 1.8 percent in 2019 and 2.1 percent in 2020.
Banking Association of South Africa 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 percent increase in VAT would drag on consumer spending, “a major source of economic activity in South Africa”.
The finmin said R57bn has been allocated to fund fee-free higher education over the medium term.
The National Treasury said 18.1m 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 punitive sin tax that would see nicotine addicts coughing up R1.22 more for a packet of 20 cigarettes, 15 cents more for a 340ml can of beer, R4.80 more per 750ml bottle of spirits, and 28 cents more per 750ml bottle of “fortified wine”.
- BUSINESS REPORT