Topline: After what has been one of the most difficult years in history, the highlights of South African finance minister Tito Mboweni’s annual Budget Speech today.



Key Facts



<ul class="wp-block-list"><li>Economy expected to grow by 3.3% in 2021.</li><li>The budget deficit has been revised to 14% of GDP in 2020/21 in response to the spending and economic pressures of the COVID-19 pandemic.</li><li>Gross debt has increased from 65.6% to 80.3% of GDP for the year 2020/21.</li><li>To support economic recovery, government will not raise any additional tax revenue in this budget.</li><li>The government has set aside more than R10 billion for the purchase and delivery of vaccines over the next two years.</li><li>Mboweni said taxpayers would not have to pay more as no new taxes will be introduced to fund vaccines.</li><li>Moreover, the minister said: “We increase the contingency reserve from R5 billion to R12 billion to make provision for the further purchase of vaccines and to cater for other emergencies.”</li><li>In addition to looking at vaccines, there is also a provisional allocation totaling R11 billion for the public employment initiative. Mboweni said with this he hopes to create another 180,000 jobs by March, to add to the temporary 430,000 jobs.</li><li>Small businesses felt the brunt of the pandemic during the year. The Department of Small Business Development has allocated R4 billion over the medium term to the township and rural enterprises, including blended finance initiatives.</li><li>The tourism sector in the country also tanked quite a bit due to travel restrictions, thus why the Department of Tourism has reprioritized R540 million over the medium term to establish the Tourism Equity Fund (TEF) as one of the measures to support the tourism sector recovery. The fund will acquire equity stakes in existing tourism enterprises, support expansion of operations and development of new operations.</li></ul>



Crucial Quote



Mboweni made it clear that South Africa is deeper in debt than they have ever been. He further told members in parliament to note that the “government is not swimming in cash”. 



“&#8230;our assessment from the Supplementary Budget in June last year still stands: our public finances are dangerously overstretched. Our borrowing requirement will remain well above R500 billion in each year of the medium-term despite the modest improvements in our fiscal position. Consequently, gross loan debt will increase from R3.95 trillion in the current fiscal year to R5.2 trillion in 2023/24.”&nbsp;



Mboweni stated further that the country owes “a lot of people a lot of money”.

South African Finance Minister delivers the Mid-Term Budget Review in Cape Town

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Treasury sets out plans to render on to Caesar what belongs
to Caesar. 



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 Revenue collection remains a bugbear for government due to weak economic growth and tax administration concerns, which were self-inflicted, South Africa’s Finance Minister Tito Mboweni told journalist in a Budget press conference. 



The revised tax revenue estimate for 2018/19 is R15.4 billion lower than anticipated by the 2018 Medium Term Budget Policy Statement (MTBPS) estimate. Thus the projected revenue shortfall of R27.4 billion is now R42.8 billion compared with the 2018 Budget estimate. 



This sombre news was revealed by Mboweni in his maiden Budget on Wednesday. To address this shortfall, tax changes designed to raise R15 billion in additional tax revenue in 2019/20 have been introduced.



These among others include:



<ul class="wp-block-list"><li>Increasing the tax-free threshold for personal income taxes from
R78 150 to R79 000. No changes will be made to personal income tax
brackets.&nbsp; </li><li>Increasing the fuel levy by 29c/litre, consisting of a 15c/litre
increase in the general fuel levy, a 5c/litre increase in the Road Accident
Fund (RAF) levy and the introduction of a carbon tax on fuel of 9c/litre.&nbsp; </li><li>Increasing excise duties on alcohol and tobacco products by between
7.4 per cent and 9 per cent. The targeted excise tax burden for wine, beer and
spirits is 11 per cent, 23 per cent and 36 per cent respectively.</li><li>No change in the monthly medical tax credit for medical scheme
contributions.</li><li>Increase in health promotion levy from 1 April from 2.1c to 2.21c
per gram in excess of 4 grams of sugar per 100ml. </li><li>Limiting the RAF levy diesel refund for primary production
industries to ensure that diesel users in these sectors equitably contribute
towards their RAF indemnity.</li><li>The implementation of carbon tax on 1 June 2019. </li><li>Government proposes to align the tax treatment on ad valorem
excise duty on motor vehicles Because of the way ad valorem excise duty is
calculated, vehicles produced locally are taxed at a higher rate than imported
vehicles. </li><li>Government intends to publish draft legislation for public comment
during 2019 on a gambling tax. </li><li>Urban development zone tax incentive to be reviewed. </li><li>South Africa reviewing its oil and gas tax regimes in 2019. </li><li>Taxing electronic cigarettes and tobacco heating products. </li><li>Definition of fuel levy goods for tax purposes to be reviewed may
include mineral ethanol, illuminating paraffin, aviation kerosene, liquefied
petroleum gas, compressed natural gas – as well as biofuels such as bioethanol
and biogas</li><li>Tax on “single-use” plastics including straws, caps, beverage cups
and lids, and containers to curb their use and encourage recycling will be
considered. </li></ul>



Although few, government has also introduced a number of tax incentives. These include: 



<ul class="wp-block-list"><li>From 1 March 2019, employers participating in the Employment tax
incentive will be able to claim the maximum value of R1 000 per month for
employees earning up to R4 500 monthly, up from R4 000 previously. The
incentive value will taper to zero at the maximum monthly income of R6
500.&nbsp; </li><li>From 1 April 2019, the list of items for zero-rating for VAT will
include white bread flour, cake flour and sanitary pads.&nbsp; </li><li>Energy-efficiency savings tax incentive to be extended to 31
December 2022. During 2019, government will review the design and
administration of the incentive to improve its ease of use, effectiveness and
economic impact.&nbsp; </li></ul>



Treasury has also recognised that to render on to Caesar, what belongs to Caesar it needs to restore the efficiency of SARS. To do this it plans to:



<ul class="wp-block-list"><li>Appoint a new SARS Commissioner in the coming
weeks.</li><li>It has established a new Illicit Economy Unit to
fight trade in the illicit economy.&nbsp; </li><li>Officially launch the Large business Unit in
early April 2019.&nbsp; </li><li>Strengthen SARS IT team &amp; systems. </li><li>Establish information sharing agreements with
allies to help fight cross-border tax evasion schemes.</li><li>Set up an inspector-general for tax administration.</li><li>Through internal processes, SARS will implement recommendations
concerning inappropriate actions, fruitless and wasteful expenditure, unfair
labour practices and maladministration.&nbsp; </li><li>SARS will review contracts that breached public procurement
regulations and will act to recover funds spent.&nbsp; </li><li>SARS is normalising refund payments. </li></ul>

ED_0077667

#Budget2019 | South African government not taking on #Eskom’s debt

Tito Mboweni inherits Africa’s recession-hit country as president Cyril Ramaphosa chases growth.

If the performance of South Africa’s currency in the week since Tito Mboweni was picked as finance minister is any good, Africa’s only economy in official recession might be on to a good thing.
The rand, Africa’s most freely-traded currency, gained more than 5% against the dollar in the week since the former central bank governor replaced Nhlanhla Nene who quit after lying about his dealings with a business family, the Guptas, accused of bribing government officials including former President Jacob Zuma.
The former labor minister brings a no-nonsense approach analysts say will be needed to take Africa’s second-largest economy out of a largely self-inflicted second recession in less than a decade amid graft allegations. He will need to rein in government spending, six months before elections that may drop the ruling African National Congress’ (ANC) support below half for the first time since the dawn of democracy in 1994.
“Fiercely independent and often regarded as a bit of a maverick, Mr Mboweni is nevertheless likely to emerge as one of Mr Ramaphosa’s more inspired decisions,’’ says Gary van Staden, analyst at Cape Town-based NKC Research.
<blockquote>“He is certainly among the more highly-regarded choices the president could have made and we expect him to add momentum to the decisions of the job summit and economic stimulus package.’’</blockquote>
Mboweni served four years as labor minister in former President Nelson Mandela’s government where he developed the first post-apartheid labor law. At the South African Reserve Bank, where he was the country’s first black governor, Mboweni spent a decade, and built a reputation as a conservative banker and defender of the country’s newly-adopted inflation-targeting regime.
His major achievement was building the country’s foreign exchange reserves from less than $10 billion to $40 billion when he left in 2009 after two terms deemed by most as successful.
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“The economy is now in a safe pair of hands. It is someone senior both in the ANC and in the government as he served as a minister of labor previously. What is also important is we have ratings agencies watching us and this will bode well for them,’’ says independent economist Mike Schussler.
Mboweni takes charge of an economy that was in recession in the first six months of the year, hobbled by nine years of poor management under Zuma which left business confidence shattered. With the economy barely growing during the period, the country lost its investment grade rating from Standard &amp; Poor’s (S&amp;P) and Fitch Ratings.
Only Moody’s maintained its rating above junk and the company deferred a decision after Mboweni’s appointment, fanning hopes it will give him time to mend the country’s finances and present a credible growth plan.
But economists say it might be too late for a country that needs to cut spending while chasing economic growth.
“I am afraid we have overplayed our hand on the numbers,’’ says Dawie Roodt, an economist at Efficient Group in Johannesburg.
“The fiscal numbers are unsustainable and the debt numbers in particular are terrible. From a numbers point of view, I am afraid this is a downgrade.’’
The new minister has a full problem tray as he comes in: unemployment is sitting at 27.2% as companies grapple with soaring costs inflated by a weak rand, falling government revenues in a country where 17 million people depend on government grants, and weak business confidence.
But his appointment may provide the turning point the country desperately requires, according to Van Staden.
“The former Reserve Bank governor can be a difficult personality, but his skillset and deep understanding of financial markets are likely to see him embrace a market-orientated policy framework with a no-nonsense attitude and dedication to economic growth and social development. We expect the appointment to have a positive impact on the credibility of the Ramaphosa administration.’’
It is credibility Ramaphosa has been building and one he will need quickly, according to Ravi Bhatia, a director at S&amp;P which rates the country’s debt junk with a stable outlook. Its next rating decision is scheduled to be announced on November 23.
“He will have to get up to speed quite quickly,’’ Bhatia said pointing to the country’s Medium Term Budget Policy statement released in October. “He will have to push through measures that will deliver growth. We want to see growth being delivered and the fiscal line being controlled.’’
&#8211; Godfrey Mutizwa

Tag: Tito Mboweni

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