Home Opinion & Features Unexpected break for taxpayers …

Unexpected break for taxpayers …


… but deficit widens

FINANCE Minister Tito Mboweni has delivered a tough Budget, indicating South Africa is facing a tough road ahead.

Not only is the country facing headwinds, but the tight fiscal space has shown the government has ­nothing much left in the kitty.

Mboweni had been expected to increase taxes, but he surprised with cuts in personal income tax.

This means more money in the pockets of low-income earners and the middle class.

But the fight is now in the ­government’s court after the minister announced a public sector wage cut of R160 billion, although the unions are not expected to take this lying down.

Cosatu and other unions were already opposed to the idea when it was mooted two years ago. But the tax breaks were not expected and Mboweni’s proposals have been supported by all political parties.

The state is in a quandary though, as the deficit has widened to 6.8% and debt has escalated to 65% of the Gross Domestic Product.

Mboweni had in the past warned it was an anomaly for the debt to GDP ratio to be above 50%. However he said it was acceptable if debt was sitting at 30%.

But the government will now pay R229bn in debt service costs a year, and this will increase in the next two years.

Parties had warned that if debt outstripped social spending it spelled disaster for the country.

The government would have to rein in the debt as it was not sustainable in the short to medium- and long-term.

The elephant in the room remains part of the budget, the bailout of State-Owned Entities.

The R16bn bailout of SAA and more billions for Eskom would cushion the entities to the next level.

SOEs have not been able to strengthen their balance sheets.

The positive from the minister was R2.4bn for the National Prosecuting Authority, the Hawks and the Special Investigating Unit.

The NPA has been complaining of a massive loss of skills, with a number of senior prosecutors having left in the past.

But the R2.4bn for law enforcement agencies will strengthen the fight against corruption and cases from the Zondo Commission.

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