Minister of Finance Tito Mboweni kicked off the highly anticipated budget speech on Wednesday by admitting that Covid-19 has had a massive impact on the country’s citizens and livelihoods. But he also said South Africa is not without hope…
Nobel Laureate, Archbishop Emeritus Desmond Tutu once said “Hope is being able to see that there is light despite all of the darkness,” Mboweni quoted the words ahead of tabling his budget for 2021.
The country’s main budget revenue is projected to be R1.35 trillion, or 25.3 per cent as
a share of the GDP in 2021/22.
South Africans can breathe a sigh of relief as tax increases will be kept minimal, the R40 billion tax increments proposed in October’s Mid-Term budget is not being implemented. In 2021/22 government expects to collect R1.37 trillion in taxes.
Positive outlook for the future
According to Mboweni, the South African economy is expected to rebound by 3.3 per cent this year, following a 7.2 per cent contraction in 2020, and average 1.9 per cent in the outer two years.
Here’s what you need to know about Minister Mboweni’s Budget Speech:
1. Vaccines
High on the list of short-term priorities is health care and coronavirus vaccines, while in the long-term the budget aims to sustain public finances.
R10 billion has been allocated to the purchase and delivery of Covid-19 vaccines over the next two years. The country’s emergency reserve has been increased from R5 billion to R12 billion in the event that more money is needed to fund vaccines.
2. Tax increments
Tax affects our pockets and while the economy is seriously strained, the Minister has acknowledged that South Africans would not cope with another severe tax increase. He also added that the government is expanding its specialised audit and investigative skills in the tax and customs areas to renew focus on the abuse of transfer pricing, tax base erosion and tax crime.
- Corporate income tax rate – Will be lowered to 27 per cent for companies with years of assessment from 1 April 2022.
- Personal income tax brackets – Will be increased by 5 per cent, which is more than inflation providing R2.2 billion in tax relief.
Mboweni says this will reduce the tax burden on the lower and middle-income households, which means if you are earning above the new tax-free threshold of R87 300, you will have at least an extra R756 in your pocket after 1 March 2021.
3. Fuel levies
These levies will affect day-to-day travel expenses for both personal and public transportation.
There will be an increase of 27 cents per litre, comprising 15 cents per litre for the general fuel levy, 11 cents per litre for the Road Accident Fund levy and 1 cent per litre for the carbon fuel levy.
4. Sin taxes
Alcohol and tobacco – considered “luxury” items – will see an 8 per cent increase.
They are as follows:
- a 340ml can of beer or cider will cost an extra 14c
- a 750ml bottle of wine will cost an extra 26c
- a 750ml bottle of sparkling wine an extra 86c
- a bottle of 750 ml spirits, including whisky, gin or vodka, will increase by R5.50
- a packet of 20 cigarettes will be an extra R1.39c
- 25 grams of piped tobacco will cost an extra 47c
- And a 23 gram cigar will be R7.71 more expensive
“It is clear that excessive alcohol consumption can lead to negative social and health outcomes. Consumers do react to price increases, and higher prices should lead to lower consumption of alcohol products with positive spinoffs,” says Mboweni.
5. Unemployment
The recent release of the shocking unemployment statistics in the country has shown the impact Covid-19 has had on businesses in SA. There are 7.2 million people out of work currently.
Government is making R83.2 billion available for the public employment programmes since the 2020 Special Adjustments Budget.
They have also augmented it by R11 billion for the Presidential Youth Employment Initiative, taking the total funding for employment creation to nearly R100 billion.
6. Social grants
More than 18 million disenfranchised South Africans receive a grant, which is a lifeline for many.
While it may be low when compared to the cost of living, it does aid in closing the inequality gap.
For those who depend on the state for grants, they can expect a small increase to their monthly allocations:
- A R30 increase for the old age, disability and care dependency grants to R1890.
- A R30 increase in the war veterans grant to R1910.
- A R10 increase in the child support grant to R460.
- A R10 increase for the foster care grant to R1050.
Fraud and corruption is also on Minister Mboweni’s radar as the Department of Justice and Constitutional Development is allocated R1.8 billion to improve business processes. Its aimed at supporting law enforcement agents in the fight against crime and corruption.
REACTIONS to the budget speech
This is what the DA had to say:
Herman Mashaba of ActionSA was equally critical, calling for the end of wasteful expenditure
The EFF said it would not result in any structural reforms for the SA economy
Main Image: TimesLive
