OPINION: The Budget speech presentation by Minister of Finance Enoch Godongwana was a very successful and pragmatic balancing act, where he and his National Treasury team had to take into consideration all the priority areas of the South African economic and human landscape, writes Professor Bonke Dumisa.
By Professor Bonke Dumisa
THE BUDGET speech presentation by Minister of Finance Enoch Godongwana was a very successful and pragmatic balancing act, where he and his National Treasury team had to take into consideration all the priority areas of the South African economic and human landscape.
To start with, they had to consider the global economic dynamics, considering the current global inflationary pressures which forced them to revise downwards South Africa’s economic growth rate predictions. They also had to take into consideration the major economic challenges posed by Eskom’s load shedding problems, considering that South Africa had 207 days of load shedding in 2022, compared with only 75 days of it in 2021.
In the last fiscal year of 2022/23, our consolidated revenue was set at R1.89 trillion, with consolidated expenditure at R2.17 trillion, and a budget deficit of R276.1 billion. These figures became their first challenge as regards how to pragmatically make budget estimates for the coming fiscal year of 2023/24. The small increases on the 2022/23 figures, with the revenues moving from R1.89 trillion to R1.96 trillion in 2023/24, with expenditures moving from R2.17 trillion to R2.24 trillion in 2023/24, and the budget deficit moving to R283.7 billion in 2023/24, showed that this national Budget was not for political claptrap purposes.
The major challenges with these base figures is that they assume that the revenues will still increase in 2023/24, despite the fact that corporate income taxes in the past three fiscal years, since at least 2020, were significantly boosted by the significantly higher commodity prices. With the Covid-19 pandemic out of the way, and most of the Russian invasion of Ukraine factors having already been factored in, there are fears that the commodity prices boom years are coming to an end, and commodity prices have begun coming down. What negative effects will this have on tax revenue collections?
The negative multiplier effects of Eskom’s load shedding is also bound to put a significant dent in both personal income taxes and corporate taxes. In short, pragmatic as the tax collection figures are, there is a slight possibility that the actual tax collections may be far lower than anticipated, and hence higher budget deficits than planned for.
It was with this in mind that the 2023 Budget was based on a lower amount of R1.6 trillion. It was based on this figure that the minister announced no major tax proposals, no increases to the fuel levy, no increases to the road levy, and some marginal change to the tax payment threshold from R91,250 per annum to R95,750 per annum.
In order to fix the major challenge posed by Eskom’s load-shedding, the government pledged to make available to Eskom R254 billion, out of the R400 billion pledged at the September 2022 medium-term budget policy statement (the mini budget). This R254 billion will be split into two tranches of R70 billion and R184 billion, with the promise to South African taxpayers being that Eskom will be made to properly account for every cent of this money, in order to ensure that there is proper transparency that it has been used for its intended purpose of fixing the load-shedding problems.
In order to encourage both businesses and individuals to invest in generating alternative renewable energy, the government has proposed some tax incentives for those who invest in solar panels. They promised an uncapped 125% tax rebate for businesses who invest in solar panels, and to allow a 25% tax deduction up to a maximum of R15,000 for individuals. This shows the government’s determination to counter the negative multiplier effect of Eskom’s load shedding.
The government has finally publicly pronounced on the negative role played by the municipalities in financially disempowering Eskom. Municipalities were, as of December 2022, owing Eskom over R56.3 billion, “and the debt is rising”. The government pledged to do something about this, including helping the municipalities to install prepaid meters in all the areas where there is a high level of non-payments and/or electricity theft. It was reassuring to hear the minister of finance talking tough on this issue, saying that “the culture of non-payment must stop”.
A total of R10.8 billion was allocated to the provincial roads maintenance grant. Will we see all the dangerous potholes disappearing all over the country?
The government showed that it was actively listening to the cries of ordinary South Africans about the general lawlessness at our national borders. The government has invested R4.2 billion in the establishment of a border management authority, and R3.1 billion to enhance border security.
The government has allocated R1.3 billion to the National Prosecuting Authority to prosecute the cases arising from the state capture enquiry, an additional R265.3 million to the Financial Intelligence Centre to fight and tackle both organised and financial crime, and an additional R100 million to the Special Investigating Unit to initiate civil litigation aimed at reclaiming assets that are the proceeds of crime.
It was encouraging to see that the government was still able to allocate some money towards improving the different types of social grants.
I could not condense all 281 pages of the full national Budget 2023 into less than two pages here. All I can say is that this was a pragmatic national Budget that sought to address most priority areas of the South African economic and human landscape.
* Professor Bonke Dumisa is an independent economic analyst.
