Finance minister Enoch Godongwana has delivered the national budget speech for 2023. Did he serve up a masterclass in budgetary brilliance that will save this country from its economic woes? Not exactly, but it is prudent to understand why the national budget is important and what areas our taxpayer funds will be committed to.
The budget speech is meant to provide an overview of the government’s economic and fiscal plans for 2023 and beyond. As such, it revolved around tax policy, borrowing, public spending and debt. It outlined how the government will finance its plans and how much it will borrow.
In addition, Godongwana discussed how the government intends to tackle existing problems to improve the country’s economy and unemployment rate, and address poverty and inequality.
Announcements were made about new initiatives and investment opportunities designed to support the country’s growth.
Finally, he provided an overview of how the government plans to deal with the debilitating energy crisis and how much this will cost taxpayers.
Decoding the 2023 budget speech
We can think of the budget speech as SA’s financial plan which, like your personal financial plan, should be reviewed each year.
In most South African households there are unlimited needs that need to be met with limited resources. The same can be said for the country. That’s why the budget is used to ensure the unlimited needs of our country are prioritised in order of importance. According to this year’s budget speech, the government’s top three spending priorities will be social development, debt service costs and basic education.
The budget speech affects every South African on some level. For example, if you're unemployed, you may want to know how the government has initiated the Presidential Youth Employment Initiative, which has created more than a million short-term jobs in past two years.
You may also benefit from knowing the government has kept the R350 social relief of distress (SRD) grant in play until March 31 2024.
If you're a student, you may be keen to know how the budget will support plans to make education more accessible to all learners. If you're on social grants, you'll be relieved to see that the increases made to these grants are roughly in line with inflation at 5%.
Those about to retire will be happy to see the tax-free lump sum portion of their retirement fund adjusted upwards of 10% to R550,000. Of course, what those who are employed are most keen to know is how the income tax rates have been adjusted for inflation.
Some good news on tax relief
SA enjoyed a revenue boost in 2022 thanks to high commodity prices and improved tax collection via the SA Revenue Service’s (Sars) continued improvement in the efficiency in tax revenue administration. However, this is not expected to stretch into 2023, so the government should avoid over-expenditure in certain areas.
The Bank of America is forecasting economic growth of 1% as opposed to the Reserve Bank’s more dismal outlook of 0.3% due to persistent load-shedding.
Before the budget speech, both the Bank of America and Sars commissioner Edward Kieswetter believed that South Africans would not see any tax hikes. If anything, they said, the government will look to ease the tax burden on its citizens.
Thankfully this prediction came true because the average South African is having a tough time. There were six interest rate hikes last year alone and the prime lending rate now sits at 10.75%.
Those who took advantage of the low interest rates and purchased homes in 2021 and 2022 are now paying exponentially more each month towards their bonds, leaving them with less household cash flow to spend on retirement savings and discretionary purchases. The budget has taken this into account and, as such, there were no tax increases for individuals.
Fuel prices were another area where South Africans were hit hard in 2022, with the general fuel and road accident fund levies contributing to 30% of the total pump price. Subsequently, these levies will not be hiked.
Load-shedding is reducing the incomes of businesses thereby reducing the tax payable to Sars. As such, businesses and households that install rooftop solar panels will now get tax rebates.
Ultimately, SA is in a state of disaster due to the energy crisis and failing infrastructure. The budget has allocated R825.8bn to services and infrastructure development over the next three years, as well as transferred R254bn of Eskom’s debt onto the government balance sheet to reduce financial pressure on the utility. These allocations have thankfully not been to the detriment of the average taxpayer; it is indeed a fine balancing act where hard decisions have been made.
Speaking to a qualified financial adviser, such as those at Edge Wealth, can help you better understand how the budget speech can affect your financial planning, and how you can best use any tax relief measures and tax rebates to your advantage.
This article was sponsored by the Edge Financial Group.