• News
  • Sport
  • TV
  • Radio
  • Education
  • TV Licences
  • Contact Us
  • SOUTH AFRICA
  • POLITICS
  • BUSINESS
  • SPORT
  • AFRICA
  • WORLD
  • FEATURES
  • OPINION
No Result
View All Result
1
Home Features Budget Speech 2020 Opinion

Mboweni might not please everyone in his #Budget2020

20 February 2020, 1:59 PM  |
SABC SABC |  @SABCNews
Tito Mboweni will deliver a  budget speech deemed to be  a delicate balancing act .

Tito Mboweni will deliver a budget speech deemed to be a delicate balancing act .

Image: SABC News @GovernmentZA

Tito Mboweni will deliver a budget speech deemed to be a delicate balancing act .

By Yolandi Esterhuizen 

On 26 February, Finance Minister Tito Mboweni will deliver what may be one of the most important South African budget speeches of the past 20 years. As he has indicated in public remarks over the past few weeks, he is keenly aware that government is rapidly running out of time and space to revive economic growth and put public finances on a sounder footing.

With the sword of a potential (some might say likely) downgrade of South Africa’s sovereign credit rating hanging over his head, near-record levels of unemployment, and limited fiscal room, Minister Mboweni is under pressure to deliver bold reforms. And to restore investor and business confidence he may need to take some steps that will be unpopular with taxpayers and constituencies like the trade unions.

Here a few points I am keen for the Minister to address in the Budget Speech:

  1. Inequality and the national minimum wage

A national minimum wage came into effect in South Africa on 1 January 2019 after several years of political debate. Despite concerns from unions that it is not a genuine living wage, and from businesses about affordability, a minimum wage that sets a baseline for industries that did not previously have a regulating measure was a step in the right direction.

I’d be interested in seeing the statistics on employer compliance. Trade unions are pushing government to hike the minimum wage by 12.5% this year – will government concede when unemployment is so high and growth so low?

With the recent changes in employment equity reporting requirements, government will have more accurate data about wage disparities between the highest and lowest paid employees in local companies. Given better information about wage gaps into different industries, government may be better placed to set benchmarks for different sectors.

  1. Tax increases

According to the Minister’s medium-term budget policy statement in October 2019, government debt will most likely exceed 70% of GDP by 2022/23 without any policy adjustments. National debt is expected to balloon from R3,2 trillion to R4.5 trillion in the next three years. Government needs an additional R150 billion in the same timeframe to meet its fiscal targets.

Between state owned enterprises burdened with debt, new spending priorities like National Health Insurance (NHI), and the ongoing need to invest in infrastructure and services, government has to raise more taxes and cut back on spending. Higher sin taxes and fuel levies are a given, but it also seems possible that we will see further personal income tax increases or a VAT increase or possibly both.

Room for manoeuvre is severely limited. According to SARS, only about 3 million taxpayers paid 97% of income tax last year and taking more money out their pockets could dampen economic growth and in turn reduce tax receipts in future years. And severe cutbacks on government spending would not only be politically unpopular, but also harm economic growth — Minster Mboweni has a delicate balancing act to pull off.

  1. Youth unemployment

With unemployment at around 29% and youth unemployment of over 50%, joblessness is a major source of suffering and a threat to social stability in South Africa. The outlook is grim, with companies in sectors as diverse as financial services, retail, telecoms and technology announcing plans to retrench thousands of employees over the past few months.

I am hoping to hear that government is taking drastic steps to address this crisis. A good place to start would be to streamline the administration of the Employment Tax Incentive. While well-intentioned, many small businesses find it so burdensome to administer this incentive that they prefer not to claim.

There are other schemes that should also be better explained and marketed – for example, the Youth Employment Service programme (YES), which is a partnership between business, government and labour. YES aims to create one million jobs for youth. In this process, firms can gain one or two levels on their B-BBEE scorecard.

  1. Annuitisation of provident funds

To recap, National Treasury several years ago harmonised how all types of retirement funds (pension, provident and retirement annuity) are treated under South African tax law.

An employer’s contribution towards any pension, provident or retirement annuity fund are now all treated as a taxable fringe benefit for the employee. Plus, a tax deduction is allowed for both the employee contribution and the fringe benefit of these funds, subject to certain limits whereas no deduction was allowed in the past for provident fund contributions.

National Treasury also proposed that the treatment of pay-outs should be aligned. In the same way as members of other retirement funds, provident fund members would only be permitted to take one third as a lumpsum on retirement and obliged to annuitise two thirds. Implementation of this annuitisation requirement was postponed several times, most recently to March 2021.

I’m curious to see if government will finally bite the bullet on this issue, despite trade union opposition. Ultimately, if the pay-outs for all classes of retirement fund cannot be standardised, the reforms may need to be rolled back and contributions may need to be treated in the same way as they were in the past.

Yolandi Esterhuizen is a registered tax practitioner & Compliance Manager with Sage Africa & Middle East

Share article
Previous Post

Elsies River community shocked by Tazne van Wyk’s murder

Next Post

WATCH | President Ramaphosa replies to SONA debate

Related Posts

A mine

Harry Oppenheimer biography shows the SA mining magnate’s hand in economic policies

1 June 2023, 8:45 PM
BRICS Foreign Ministers meet in Cape Town

Minister Pandor hosts BRICS foreign ministers to thrash out path into the future

31 May 2023, 7:52 PM
A participant stands behind a rainbow flag during a gay pride parade promoting lesbian, gay, bisexual and transgender rights, in Chennai, India June 24, 2018.

Being queer in Africa: The state of LGBTIQ+ rights across the continent

29 May 2023, 8:46 PM
FILE PHOTO: Saudi Arabia's Crown Prince Mohammed bin Salman shakes hands with Syria's President Bashar al-Assad ahead of the Arab League Summit in Jeddah, Saudi Arabia, May 19, 2023.

Saudi embrace of Assad sends strong signal to US

24 May 2023, 7:06 AM
South African money.

Get-rich-quick schemes: Five signs you’re being scammed

22 May 2023, 7:33 PM
FILE PHOTO: Flags are pictured during the first working session of G-7 foreign ministers in Muenster, Germany, November 3, 2022.

OPINION | G7 Hiroshima meeting gathers to counter China’s influence

19 May 2023, 3:48 PM
Next Post
[FILE IMAGE] President Cyril Ramaphosa replies to the SONA 2020 debate.

WATCH | President Ramaphosa replies to SONA debate

Most Viewed

  • 24hrs
  • Week
  • Month
  • Eastern Cape ActionSA raises eyebrows over qualifications of senior officials
  • Unisa suspends registrar for various breaches of policy
  • Orlando Pirates player Thembinkosi Lorch found guilty of assault
  • Slain teen Palesa Malatji’s family calls for death sentence to be reinstated
  • Tina Joemat-Pettersson has passed away
  • Dr Nandipha’s looks during court appearances under the spotlight
  • Deadline for Zimbabwean Exemption Permits draws near
  • Reserve Bank expected to increase repo rate on Thursday
  • Zimbabwe receives 18 helicopters from Russian Federation
  • Eastern Cape ActionSA raises eyebrows over qualifications of senior officials
  • [Update] Johannesburg Mayor takes ill during State of the City Address debate
  • Dr Nandipha Magudumana – from celebrity doctor to fugitive
  • EFF receives backlash for inviting Prof Lumumba to address Public Lecture
  • Ramaphosa and Putin discuss Ukraine during phone call: Kremlin
  • Man dies in police holding cells after allegedly dousing girlfriend with petrol

LATEST

Suspended Public Protector Busisiwe Mkhwebane.
  • Politics

UDM calls for police to reveal investigation findings on Dyantyi


Saudi Arabian soccer team Al Ittihad player Karim Benzema arrives in Jeddah, Saudi Arabia, in this handout photo obtained by Reuters June 7, 2023. Al Ittihad/Handout via REUTERS THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY. MANDATORY CREDIT     TPX IMAGES OF THE DAY
  • Sport

Benzema fever hits Jeddah ahead of Al-Ittihad presentation


[File Image] A view shows smoke rising above the area.
  • World

Canadian wildfires affect New York City’s air quality


Former South African President Jacob Zuma
  • Politics

Zuma to appeal court’s ruling to set aside Downer, Maughan private prosecution


U.S. Capitol Building in Washington, U.S, January 6, 2021.
  • World

Hollywood actor becomes latest arrested in Jan 6 Capitol assault


A matches lighting up fire.
  • South Africa

Court case against alleged Fort Hare arsonists continues


Weather

  • About the SABC
  • Contact Us
  • Jobs
  • Advertise
  • Disclaimer
  • Site Map

SABC © 2023

No Result
View All Result
  • SOUTH AFRICA
  • POLITICS
  • BUSINESS
  • SPORT
  • AFRICA
  • WORLD
  • FEATURES
  • OPINION

© 2023

Previous Elsies River community shocked by Tazne van Wyk’s murder
Next WATCH | President Ramaphosa replies to SONA debate