Ben Bierman, Managing Director of Business Partners Limited
Ben Bierman, Managing Director of Business Partners Limited

Business101: Despite tough Budget speech, Mboweni vows rebound

By Opinion Time of article published Nov 1, 2020

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By Ben Bierman

JOHANNESBURG - Finance Minister Tito Mboweni has delivered what is arguably his most testing Medium-term Budget Policy Statement (MTBPS) to date.

Faced with runaway debt, an energy crisis, and an economy predicted to shrink 7.8 percent this year, Mboweni laid out the policy framework and defined the government’s goals and objectives based on the current economic landscape.

Here are five key takeaways for the local small and medium enterprise (SME) sector:

Debt

The government is currently borrowing at a rate of R2.1 billion per day, and 21 cents out of every rand goes straight towards paying interest on existing debt.

While the revised fiscal framework puts us on a course to stabilise the debt-to-gross dometic product ratio at around 95 percent within the next five years, the stock of gross debt is projected to rise from roughly R4 trillion to R5.5 trillion in 2023/24.

Taxes

The National Treasury confirmed plans to introduce tax increases of R40bn over the next four years to combat the government’s growing shortfall; R5 billion is projected for 2021/22, R10bn for 2022/23, R10bn for 2023/24 and R15bn for 2024/25.

There is no indication on where exactly those taxes will come from, so this is up for speculation.

Energy

While the mid-term Budget did not include any updates on plans to restructure Eskom’s R488bn debt burden, Mboweni did report that the way has been opened for the procurement of almost 12000 megawatts of new electricity capacity to be provided by independent power producers.

This signals that the government is ready to embrace a sustainable future that does not include rolling blackouts without Eskom and the consumer overpaying.

Relief

Mboweni has committed to extend the short-term tourism relief fund to mid-2021 to assist eligible small, medium and micro-enterprises with working capital.

He said the government has set aside R540bn over the medium term for a tourism equity fund to support black-owned and commercially viable enterprises to acquire shares in tourism enterprises.

Future

Among other commitments, Mboweni promised to make it easier to do business by removing the needlessly complex red tape that increases the cost of doing business.

He also committed to create stable and predictable policies, which will not only instil confidence in investors, but also business owners and the average South African.

While times are tough right now, he insisted that green shoots are emerging, promising a strong rebound in the next quarter.

Bierman is a managing director at Business Partners Limited.

BUSINESS REPORT

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