Aloe Ferox – a bitter aloe found in the arid parts of South Africa that requires very little water to survive and Finance Minister Tito Mboweni’s favourite symbol of South Africa’s tenacity to endure during difficult times. The plant was again perched in front of him as he delivered his speech.

The 2020 budget provided some welcomed relief to taxpayers as Minister Mboweni focused on cutting government expenditure rather than increasing revenue.

A key announcement was the Government’s intention to reduce the public sector wage bill by an estimated R160,2 billion over the next 3 years. COSATU and other union organisations have not taken this lightly and it remains to be seen whether the state will be able to follow through.

State Owned Entities will be given further respite to try and become viable operating companies contributing to the fiscus. The state has pledged the following funding over the next 3 years:

 With a budget deficit above 6%, a debt to GDP ratio projected to exceed 70% in 2022/2023 and the disruptive economic conditions, it seems inevitable that the country will be downgraded to junk status this year. According to several economists it is a matter of when and not if.

Some of the budget highlights include the following:

• The personal income tax brackets and the tax rebates were increased by 5.2% which was slightly above inflation.

• The threshold for transfer duty on sale of property was increased to R1 million (previously R900,000).

• Capital Gains Tax remained unchanged. Individuals will still have to include 40% of their gain as part of their income while companies and trusts will have to include 80% of their gain in income.

• Medical tax credits were increased for the main member and the first dependent to R319 (previously R310) and thereafter R215 (previously R209) for all other dependents.

• Deductibles for the pension, provident and retirement annuity contributions remained the same. The regime allows for a capped 27.5% of the greater of remuneration or taxable income to the maximum of R350,000 per year.

• Sin taxes were increased substantially. This year the budget plans to tax “vapers” at a rate of 75% of the tax rate of cigarettes. The tax on wine, beers, spirits, cigarettes and cigars have all been increased.

 For those watching their pennies, you may want to consider the traditional African beer – sorghum as an indulgence as this has been spared an increase.

 The Minister announced that fuel levies would be hiked by 25c per litre from 01 April 2020, a portion of which would go to the Road Accident Fund.

• The budget has set aside R369 billion to invest in education, building new schools, refurbishing decrepit schools, providing water, electricity and sanitation and advancing the school curricular into the modern technological era.

The budget at its essence highlights the urgent need for growth-enhancing structural development, that is resolutely executed to support the sustainable growth for the South African economy.

Several budget proposals were made that may impact the industry including limiting the use of company assessed losses to reduce taxable income which will be unpacked in the coming months.

Minister Mboweni’s speech was well received and there was an improvement in market performance as the rand, government bonds and retail shares on the JSE all firmed late Wednesday afternoon.

Aneesa Khan | Finance Manager