SA's budget shake-up: Winners, losers, and what It means for you

Key topics:

VAT hike to 16% will impact consumers and inflation.
Infrastructure projects boost demand for building materials.
Civil servants to receive wage increases and early retirement offers.

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*By Gordon Bell

South African Finance Minister Enoch Godongwana cut spending and adjusted the tax mix in a revised budget that was presented to lawmakers on Wednesday, three weeks after the nation’s coalition government rejected his initial plan.

Here’s a rundown of how you may be impacted:

LOSERS

Consumers

The National Treasury will raise value-added tax by a 0.5 percentage point on May 1 and by the same margin on April 1 next year, which would bring the rate to 16%. While the proposed increase is lower than the 2 percentage-point hike envisioned in the previous iteration of the budget, it still threatens to stoke inflation and deter consumer spending. Retailers and manufacturers are among businesses that will likely be impacted.

Individual taxpayers

To help compensate for lower-than-anticipated VAT revenue, the Treasury says personal income-tax brackets won’t be adjusted to take account of inflation. That will leave most people with less money in their pockets, and those who earn regular salaries and can’t restructure their packages the most affected.

Smokers and drinkers

Godongwana proposed raising excise duties on alcoholic beverages, pipe tobacco and cigars by 6.8%, and on cigarettes and vaping products by 4.8% from April 1.

Travelers

Over the next three years, the Department of Home Affairs will be allocated 4.9 billion rand ($267 million) less than was announced on Feb. 19. That will hamper efforts to digitize its systems and hire more staff, and set back plans to make border posts more efficient and speed up the issuing of visas, passports and identity documents.

WINNERS

Infrastructure Companies

The government is sticking to plans to spend 1.03 trillion rand on roads, water and energy projects and other infrastructure through March 2028. That should boost demand for cement, steel and other building materials, and provide work for construction and engineering companies. The investment should ultimately make it easier to do business, bolster investment and spur economic growth.

Motorists and commuters

The Treasury intends leaving fuel levies unchanged to mitigate the inflationary effect of higher petroleum prices. It estimates that tax relief arising from the concession will amount to about 4 billion rand. Levies paid to the Road Accident Fund, which compensates accident victims, were also left unchanged.

Civil Servants

The government is sticking to a deal to lift state workers’ wages by 5.5% in 2025-26 and by the inflation rate over the following two years. It also retained plans to offer senior staff early retirement packages. A proposal made by the country’s biggest labor group that it pause contributions to a defined benefit pension fund for state workers was rejected.

The Democratic Republic of Congo

The Treasury committed 5 billion rand to the military to fund a peacekeeping mission in eastern Congo, where Rwanda-backed rebels have wreaked havoc. A number of South African troops have died in the central African nation, and regional groups haven’t managed to broker a ceasefire so far.

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