Finance Minister Enoch Godongwana delivered his maiden budget speech at the Cape Town City Hall yesterday. The budget speech follows the president’s state of the nation address and seeks to make “financial” good on the promises he announced. It’s kind of like the CFO telling us how he’s going to make the CEO’s plans a reality. 😄 There were no fireworks but Godongwana’s offering deserves some praise.
Here are the highlights:
▪️ Income tax will not increase and, for the first time since 1990, there will be no increase to the general fuel levy on petrol and diesel or the Road Accident Levy – these factors, among others, contribute to the increase in the petrol price. Plus the minister said they will review how the price of petrol is structured, as we’ve previously called for. Finally! 😅
▪️ SA’s grant system is one of the most sophisticated in the world and keeps millions from extreme poverty, while effectively sharing the pie in a very unequal country. The Covid-19 Social Relief of Distress Grant (SRD), introduced in May 2020 to provide financial support to nearly 10 million South Africans, will be extended to the end of March 2023 but will stay at R350 per month. Godongwana said the grant extension will cost the economy R44bn, but that it could be “comfortably” accommodated thanks to a healthy commodities boom and unexpected tax revenue windfall last year. Social development will receive R58.6bn over the medium term to cover other grants. The elephant in the room is still the universal basic income grant, which activists have long lobbied for, but which the government says its finances can’t cover yet.
▪️ The price of alcohol and tobacco increased between 4.5 and 6.5 percent on Wednesday.
- A 340ml can of beer or cider will cost 11c more;
- A 750ml bottle of wine will be 17c more expensive;
- A bottle of sparkling wine will cost an additional 76c;
- A packet of cigarettes will cost an additional R1.03.
▪️ The economy is in good financial standing, thanks to tax revenues exceeding expectations by R181 billion last year. We really have that commodities boom to thank for lifting our economy, but as we previously pointed out, it’s temporary. Still, the windfall gains can be used to stimulate the economy and protect the poor, while policymakers do their best to sustain the wins. 🤞🏽
As Daily Maverick’s Sasha Planting points out: “All in all, this is a budget that can’t easily be criticised. Treasury has done what it can to create an environment conducive to returning business confidence and investment. Now it’s up to the line departments to execute the structural reforms that will really move the needle on economic growth.” 🌱
This article appeared as part of The Wrap, 24 February 2022. Sign up to receive our weekly updates.