Budget Speech 2020: Finance Minister Tito Mboweni surprises, disappoints experts
Mboweni announced there would be no major tax increases, wrong-footing the pundits who predicted wealth taxes, an increase in VAT of 1%, increases in company tax and in Dividends Withholding Tax (DWT) as well as changes to retirement tax timetables.
As a result of the speech the rand gained 0.5% at the mention of tax cuts to the tune of R14bn. Analysts said it was “a massive surprise as the market expected hikes”.
However Treasury Partner at Peregrine Treasury Solutions Bianca Botes said: “Reality set in and this knee-jerk reaction was offset as the speech continued and the currency was trading back at R15.18/$, bringing the gain to only 0.2% for the day.”
Head of Fixed Income at Anchor Capital SA Noel Wapenaar said: “I didn’t expect that sort of Budget. I was very surprised, but in a positive way.”
Wapenaar was impressed by the intention to decrease the wage bill and said “that was quite a strong statement and would probably get a negative reaction from the trade unions who were bound to be grumpy”.
“However the quid pro quo was the allocation of R16.4bn to save jobs at SAA and R230bn to Eskom in a similar vein which evened things out and made it all quite fair really.”
“The government’s expenses needed reining in and the lack of tax increases will make business and consumers happy and hopefully reignite the economy,” said Wapenaar.
Director of the University of Stellenbosch Business School Prof Piet Naude said: “The fact that he mentioned the SA Reserve Bank and its independence was a positive sign that the Cabinet is against its nationalisation as was suggested in some quarters.”
On the question of the establishment of a state bank, Naude said: “We heard no rationale for a state bank and we don’t see what it will do. There is no need for the state to try and compete with the likes of Discovery, Tyme Bank and Capitec.
“That’s a mistake.”
Speaking of missed opportunities in the Budget Naude said: “The bad news is that our economic growth forecast is subdued.
“Today’s Budget has done little to stem the tide of the debt trap.”
Reacting to the Budget Economic Opportunities MEC David Maynier said: “The full horror of national government’s mismanagement of our public finances is reflected in the fact that, despite imposing significant Budget cuts on provinces, national debt still spirals out of control over the medium term to a terrifying R4.38 trillion, or 71.6% of GDP, in 2022/23.”
“To put this in perspective, national government will be spending R290bn on debt service costs in 2022/23, which is a staggering R239bn, or five times more than we will spend on delivering front-line services such as education, health and social development this financial year in the Western Cape.”@MwangiGithahu