TAX PROPOSALS –
Where Enoch is giving…
• Net tax relief of R13bn in 2023/24 mainly to support the clean energy transition and increase electricity supply.
• Roughly 70% of this is to incentivise companies (R5bn) and individuals (R4bn) to invest in generating electricity from renewables.
• Fiscal drag is addressed through inflation-related adjustments to the personal income tax tables, the retirement tax tables, and transfer duties.
Where Enoch is taking…..
• Excise duties on alcohol and tobacco rise 4.9%.
Where Enoch is leaving things as they are….
• No changes to the general fuel levy or the Road Accident Fund levy.
• The diesel fuel levy refund for manufacturers of foodstuffs is extended until 31 March 2025.
ECONOMIC DRIVERS –
Things are bad and risks are growing….
• Real GDP will fall back below SA’s population growth rate for the next two years – to 0.9% in 2023 and 1.5% in 2024. This is due to power cuts, deteriorating rail and ports infrastructure and weaker global economy.
• The stagnation could deteriorate still further – major risks: power cuts increase; rail and ports infrastructure worsens; growing criminal activity; inflationary pressure increases from global supply chain disruptions and the Ukraine War; and fall in commodity prices.
• Inflation is expected to fall from 2022’s 6.9% to 5.3% this year and 4.9% in 2024.
What’s being done about it……
• Appreciation of TINA – Higher economic growth requires a stable macroeconomic framework, rapid implementation of economic reforms and improved state capability.
• Government will take ‘urgent measures’ to reduce power cuts including opening electricity supply to the private sector. Several reforms are under way to improve transport sector, specifically freight rail.
BUDGET FRAMEWORK –
Getting closer but long way from balancing the books….
• For the year that ends this month, Government will celebrate posting a primary surplus (ie where tax income exceeds non-interest spending) the first time since 2009. But the cost of servicing debt mostly built up during the Zuma Era spending spree continue to grow and are projected to rise from the current 18% to almost 20% of revenue by 2026. In aggregate therefore, SA’s despite some improvement, SA’s Government is still spending R5 for every R4 collected.
• Annual debt service costs are now over R340bn – triple what is spent on Police and the Budget’s biggest line item, ahead of Basic Education (R310bn) and Social Grants (R286bn).
• The Budget Deficit will decline from 4.6% to 4.2% of GDP for this year; with Treasury targeting 3.2% in 2025/26. This is a significant improvement helped by higher tax income due to better commodity prices and compares with projections of 5.1% for 2022; 4.9% for 2023 and 3.3% for 2026.
• The assumption of R254bn in Eskom debt, means total government debt stabilises at 73.6% of GDP in 2025/26, later and at a higher level than previously expected.
SPENDING PROGRAMMES –
‘Covid-relief’ grant continues – ah yes, there’s an election in 2024…
• The 2023 Budget allocates additional funding R227 billion over the next three years, mainly to extend the COVID-19 social relief of distress grant until 31 March 2024.
• The learning and culture function is allocated R1.43 trillion over the next three years – the largest proportion (24 per cent) of spending.
• Community development is the fastest growing spending area for the Government, averaging 8% annual growth with more for local government and infrastructure.
Read also:
- Budget Speech: Eskom’s $22 billion debt reorganisation plan – will investors sink or swim?
- Kevin Lings previews Budget 2023: Investment markets will punish SA if FinMin spends R80bn windfall on a permanent cost.
- Nettle-grasping Enoch goes boldly on Eskom, Sanral, greylisting and Transnet
