This year’s Budget Speech was arguably one of the most anticipated (and closely watched) in recent history. So, what stood out – and what should savvy investors know about it?
To begin with, Finance Minister Tito Mboweni surprised markets and promised to slash the sprawling public-sector wage bill.
Indeed, the key item in the budget was a proposal to cut the state’s rather bloated wage bill by R160.2 billion over the next three years. In response, Cosatu have threatened to push back against the proposed wage cuts.
Importantly, in an attempt at fiscal sustainability, the government will cut expenditure by R261 billion over three years (the R160.2 billion wage cuts are included in this figure).
Also, rather than announcing a VAT hike which was expected by some, the Minister gave taxpayers some income tax relief in the 2020/21 financial year.
The annual limit on contributions to tax-free savings accounts will be increased from R33 000 to R36 000 from March 1, 2020 – while lifetime limits on tax-free saving amounts remains at R500 000.
The fuel levy will rise by 25c and the plastic bag levy goes to 25c a bag. Alcohol and cigarettes will be taxed a further 4.4% – 7.5%. African beer will be taxed 4.4% less!
On a general note, the economy grew by 0.3% in 2019 and is projected to grow by 0.9% in 2020. The budget deficit (the difference between spending and revenue that is made up through borrowing) has gone up to 6.8% of GDP.
Now that the Budget Speech is over, we can all go back to stocking up on candles and hunting for fairly priced generators!