OPINION: No quick fix in SA’s Budget

By Andrew Golding Time of article published Mar 4, 2019

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JOHANNESBURG - In one of the most closely watched National Budget speeches in recent years, Finance Minister Tito Mboweni outlined the government’s plan to boost growth, increase tax collection and reduce debt, with strong attention paid to Eskom and SOEs.

A clear thread running through the Budget speech was a need to focus on improving education and boosting skills development and training, which is a solid foundation on which to build a stronger economy while fostering job creation, as well as a welcome move to meaningfully involve the private sector in various initiatives.

Increased spending on infrastructural improvements, including non-toll roads, rural roads and water, and incorporating involvement of the private sector in designing, building and operating key infrastructure assets augurs well for the contribution such projects - and the private sector - makes to transport, convenient access and local economies.

Consumers will be relieved that personal income tax rates have not been increased. However, minor increases in tax thresholds and tax rebates for individuals will not fully offset fiscal drag, thereby keeping household finances under pressure. With various measures being implemented to revive Sars capabilities it is hoped that this will ultimately help generate more revenue than further tax increases would.

However, further negative news and inflationary in itself, placing an additional burden on consumers, was yet another increase in the fuel levies, which rise by a significant 29c per litre for petrol and 30c per litre for diesel - and includes a carbon levy which will come into effect in June 2019.

Positively, the reduction in the bloated public sector wage bill shone some light on the Budget, with an option to take early retirement set to make a difference in the shorter to medium term and certainly over the longer term. This plus the fact that overtime and bonuses will be limited, while the announcement that members of Parliament and provincial legislatures and executives at public entities will not receive a salary increase this year is a step in the right direction.

Unfortunately, there is no quick fix for Eskom, with the recent load shedding biting a chunk out of our economy in recent weeks, and which is exerting pressure on expenditure by requiring bailouts.

From a housing perspective, while the land expropriation issue is yet to be finalised and clarified, funding for the upgrading of informal settlements and the Our Help to Buy subsidy, a pilot project with R950 million over three years to help first-time home buyers acquire a home are welcome news. Also noteworthy is the support for private sector investment in agriculture via support for emerging farmers.

The finance minister also noted that there is a need to respond to rapid urbanisation by shifting from ‘horizontal’ development to vertical or ‘going up’, as part of an integrated development plan. This would suggest that government incentives may reinforce the shift towards the construction of more sectional title homes - a trend already evident in many of the country’s major metro housing markets.

We would certainly have liked to see a reduction in the transfer duty which would have served to stimulate property transactions across the board - with the potential to increase volumes and thereby revenue generation for government. And we also hoped for budget policies and incentives to promote eco-friendly building incentives and budget incentives to enable quick and cost-effective building solutions to stimulate the lower end of the market.

Overall, the Budget was more or less as expected; what we need now is to see South Africa embarking on a recovery path which will promote confidence and investment, which will have spin-offs for the economy and the housing market across all sectors.

Dr Andrew Golding is chief executive of the Pam Golding Property group. For further information visit www.pamgolding.co.za or contact Pam Golding Properties KZN on 031 207 5584.


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