Archive photo. (Photo: Pexels/ Pixabay)
Enoch Godongwana, the finance minister,’s budget speech contained several DA policy positions and is proof that the ANC no longer rules alone.
So says Dr. Mark Burke, the DA’s spokesperson on finances, after Godongwana introduced this year’s budget on Wednesday.
In addition, the DA welcomed the fact that there were no tax increases and no block creep for the first time in three years.
Burke says the budget shows a large-scale rethinking of tax policy by the national treasury under a coalition government.
For the first time in 18 years, the VAT registration threshold for small, medium and micro enterprises has been adjusted from R1 million to more than R2 million.
The DA also welcomed the upward adjustments in several other limits including the tax exemptions for primary residences, an increase in tax-free savings account limits, turnover tax threshold increases as well as an increase in capital gains tax exclusions for individuals as well as businesses.
Burke says this year’s budget indicates a significant shift for the DA because this party has an influence on the budget.
“Although the budget takes several steps in the right direction, there are still areas for improvement. Unemployment is unacceptably high while growth is unacceptably low. We cannot be satisfied with 1.6% GDP growth. This should be the absolute minimum to stabilize GDP per capita, which would mean that South Africans do not become poorer every year.”
Burke also says that the DA is particularly frustrated by the burden that several hundred state-owned enterprises place on the fiscus.
“Not only do they regularly require bailouts and debt guarantees, but they also require the annual transfer of billions to state-owned enterprises, many of which are pointless. On the spending side, the country needs better funding to fight the illegal economy.”
He emphasizes that tax revenue lost to illegal cigarettes and alcohol is “money in the pockets of crime cartels”.
“No budget is perfect, but this one is an improvement. It shows responsible macroeconomic policy. It signals the beginning of a different paradigm regarding taxation and it shows action, not just words, when it comes to assisting small businesses. It should be welcomed,” says Burke.
(Photo: selensergen/iStock)
Far from being an economic summer for SA
Wouter Wessels, FF Plus MP and this party’s chief spokesperson on finances, says this year’s budget offers a mixture of relief and optimism, but it still remains within a framework of bad policies and inadequate service delivery.
According to him, the economy is growing too slowly for a truly rapid recovery with an estimated 1.6% for this year against the 1.2% of last year due to the brakes of harmful policies such as black economic empowerment and affirmative action.
“South Africa’s fiscal situation is indeed better than in recent years with increased income. However, the consolidated budget deficit is still a problem. The financing of historical government debt is high and even if there is currently a primary budget surplus, borrowing must still be done to service the deficit that arises due to debt financing costs.”
However, the situation at local government level remains a major problem. Corruption, wrong decisions and misappropriation at this level can play a significant role in counteracting the possibility of growth.
Tax brackets for personal income tax have been fully adjusted to inflation again after two years. This means R13.7 billion more in the pocket for ordinary tax payers and will boost the economy.
(Archive photo: Canva)
Other important announcements include R20 billion worth of planned tax increases which have been cancelled, mainly thanks to better income from VAT and company tax.
According to Wessels, this shows that the minister was looking for ways to accommodate ordinary tax payers.
“This is a good sign and should be welcomed.”
There is a stimulus for small business development with the VAT registration threshold moving up from R1 million to R2.3 million and capital gains exclusion for business sellers rising to R2.7 million.
Overall, South Africa is in a more stable fiscal position than in recent years, especially with the budget deficit down to 4.5% of GDP, says Wessels.
From the FF Plus’ point of view, this is a step forward, but not enough.
“We welcome the relief and growth focus, but the burden of social assistance and a public salary bill that takes up around 35% of state income is unsustainable. Municipalities are still falling apart due to incompetent cadre appointments and rescue packages for state entities such as Transnet are wasting billions.”
He maintains that real change and faster growth above 3% will only happen with big cuts in waste, merit-based hiring and greater market freedom.
“Without this, true growth will not be able to take place and taxpayers will continue to bear a heavy burden. The FF Plus therefore demands urgent reforms for a capable, efficient state. The few positive fiscal signs show what the country is capable of,” says Wessels.