Finance Minister Tito Mboweni did not announce any major new tax proposals when he delivered the budget speech in Cape Town on Wednesday. The move is expected to support economic growth after the country’s already ailing economy was battered by the impact of the coronavirus pandemic.
Political parties have expressed mixed reactions to the speech.
The African National Congress has welcomed the Budget tabled by Finance Minister, saying it is the best Budget for the country under the circumstances faced.
Among the key announcements made was the allocation of R10 billion for the procurement of coronavirus vaccines over the next two years.
Mboweni has also said the Department of Justice and Constitutional Development has been allocated R1.8 billion to improve business processes and to combat corruption.
ANC Treasurer-General, Paul Mashatile, says, “As the ANC, we welcome the Budget. I think under the circumstances, it’s a good Budget and the fact that R10 billion has been made available for the rollout of the vaccine, it’s a good step ahead particularly because these resources will go to provinces and the provincial health departments to be able to do that. We are, of course, going to ensure that we continue to be vigilant against any corrupt activities so that these resources can benefit the people that they are intended to.”
Political parties react to Minister Mboweni’ speech:
Meanwhile, the Democratic Alliance’s Shadow Minister of Finance Geordin Hill-Lewis has described the Budget Speech as severely lacking in many aspects.
During his Budget Speech, Mboweni highlighted economic recovery, increases in sin taxes, the allocation for the fight against corruption and upgrading the country’s six busiest ports, amongst other announcements.
Hill-Lewis says the Minister failed to address the bailout of state-owned enterprises and the decrease in the social grant budget is indefensible.
“There was a lot that was not in the speech that was in the detail of the budget, that I think was slightly dishonest to leave out. Chief amongst those, another bailout for SAA. We got R31.7 billion for Eskom. That wasn’t even in the speech and while he speaks about a R10 increase for social grants, actually if you look at the budget, the social grant budget is being cut. So, it’s an extraordinary budget that I think actually kicks poor South Africans when they are down. What we really needed was to see prioritisation of social spending and make sure the cuts are focused elsewhere. What we are seeing is more bailout cuts to social grant cuts, to social services and I just don’t think that is morally defensible.”
The Freedom Front Plus says Mboweni’s 2021 Budget has failed to address government debt. FF Plus leader Pieter Groenewald says government debt is spiraling out of control.
“We welcome the fact that there is no personal or there is an increase is personal tax although there is a 27 fuel levy that will have a negative effect on the cost of living. But what is really disturbing is the fact that government debt in SA is out of control. If the government was a company they would have been liquidated long ago.”
VIDEO: Budget 2021 delivered by Minister of Finance Tito Mboweni:
‘Lacking key implementations’
EFF says the budget would not resolve the economic woes of the country. The party’s Mbuyiseni Ndlozi says the budget was severely lacking in key implementations and details in order to advance the economy.
“There is nothing in this budget essentially that is going to result in the transformation of the structure of South Africa’s economy. Chronic unemployment, the fact that we did not as a country have industrialisation that is happening; even the promises that they will drive government expenditure to stimulate local industrialisation and local production. They have been making these promises over the years and they have not been materialising. There were fundamental problems that relate to illicit financial flows that the budget said nothing about you collect taxes from a very significant industry called tobacco. You leave the big mines, you leave the auditing firms. So there’s nothing in the budget that is going to lead to the fundamental changes that are required.”
The Minister has expressed optimism about the country’s economic recovery, saying the South African economy is expected to bounce back by 3.3% this year. This follows a contraction of 7.2% last year which was fueled by the coronavirus pandemic.
“Global economic growth is expected to rebound to 5.5% in 2021 before moderating slightly to 4.2% in 2022, spurred on by the expected rollout of COVID-19 vaccines across the world. Sub-Saharan Africa is forecast to grow by 3.2%. The South African economy is expected to rebound by 3.3 percent this year.”
Rand gains 1% after budget speech
The markets have reacted positively to his budget adjustments. Especially on the positive announcement on corporate tax decrease and additional COVID-19 support and vaccine funding.
The rand is currently trading at R14.44 from R14.53 in earlier trade.
Tendani Mantshimuli is an Economist at Liberty: