We have experienced almost a full year of a global pandemic, and with this in mind, South Africa’s Finance Minister, Tito Mboweni, sought to paint a hopeful picture, despite the dismal picture of South Africa's economic state and drew a clear illustration of the challenges and opportunities within the country that requires greater “fiscal prudence as the best way forward.”
Economic growth expected to rebound to 5.5% in 2021 spurred by the vaccination roll-out, with China expected to grow 8.1% and Sub-Saharan Africa expected to grow by 3.2%, with South Africa at 3.3%.
While Africa is seen as the next great continental opportunity around the world, the reality remains that South Africa is plagued by low growth, a increase in budget deficit, and mounting debt servicing costs due to COVID-19, failing to helping our country at least rise to its knees. Fortunately, the Finance Minister made clear there would be no further bailouts for SOEs.
He shared many insightful truths including the importance of protecting our own infrastructure, terming it as our own “asset management” and the importance of equity ownership in land reform and “not just gifts,” supporting the Land Bank with a commitment of R7bn over the next three years.
In order to “get our fiscal house in order” Tito Mboweni outlined how we needed to manage the servicing of our debt - “we owe a lot of people a lot of money,“ he said - and shared that we will receive the lowest tax income collection in our history, R213bn lower than last year. To solve this he proposed tax changes, including lower corporate income tax rates (27%), increased personal income tax (5%), an increase in fuel levies, and an increase in excise duties on alcohol and tobacco (8%). He reminded us that, of the R2tr of spending over the medium term, 56% goes to social services.
Within this video series, a number of Sasfin thought leaders share their insights on this year's budget speech.
Bongiwe Momoza Budget Speech II
Nesan Nair Budget Speech
Mike Haworth Budget Speech
Lwando Ngwane Budget Speech
In conclusion, assurances were given that the government debt will stabilize and asked South Africans to “take courage, persevere and walk with us. Above all, let us heed the counsel of Archbishop Tutu: See that there is light despite all of the darkness. A prosperous future is possible for our beautiful country. Gloria est consequenda – Glory must be sought after!
Normally, February is the month when all eyes are on the Budget and what we can expect for the next year. This year was not only one of the most difficult and important budgets, but it comes after months of intense scrutiny of our economy.