The Budget Speech, as expected, contained few surprises despite the challenges faced by the domestic economy. Given that it is an election year, Mr Godongwana [Enoch Godongwana, Minister of Finance] did not raise personal-income tax rates, but also did not take into account the inflationary effect on household income. There was no increase in the Value Added Tax rate as this would have been hard to swallow prior to voters going to the polls.
As the ZAR depreciated markedly against the US$, government debt increased significantly and forced the transfer of R150 m from the Treasury and our much-vaunted gold reserves to the fiscus to reduce the mounting debt load.
The two-pot retirement reform, which comes into effect from 1 September 2024 and allows pre-retirement access to a portion of retirement assets (provident schemes), is expected to raise R5bn in tax revenue as fund members access once-off withdrawals. One has to question the long-term impact when those individuals who participate in this scheme reach retirement age.
While the 2024 Budget had a fairly stable outcome, the country’s economic challenges remain and, while our GDP appears to be on a growth trajectory, it is simply too weak to make a meaningful dent in our unemployment rate. Both consumer and business confidence remain low and, with no Budget allocation for structural reform, South Africa remains a country that is very difficult to do business with, due to load shedding, crumbling roads and water shortages.
. Vince van der Merwe is the Managing Partner of MC Squared, an online business-consulting company.
