2023 Budget Speech welcomed but a lot needs to be done as economy shrinks.
On Wednesday, the minister of Finance Enoch Godongwana presented one of the toughest budget’s since his appointment, due to unrest that befell the country in 2021, sliding economy, energy crises, floods, unjustifiable inflation, increasing unemployment, crime, among others.
There we no mentioning of the controversial South African Tourism and Tottenham Hotspur FC deal and township economic boost, that left many wondering reasons behind.
The minister tried to strike a balance between containing national debt and alleviating pressure on Eskom’s balance sheet by enabling the government to take on R254 billion of its debt, freeing up the state-owned company to conduct maintenance and invest in new electricity generation.
In his medium-term budget speech, Godongwana had forecast the economy could grow by 1.4% in 2023 and 1.7% and 1.8% in the next two years respectively. The economy grew at an estimated 2.5% in 2022.
The budget was done under an extremely difficult economic climate and the positive windfall in revenue collection of R1.69 trillion for 2022/23 which is R93.7 billion and R10.3 billion above the estimates of the 2022 budget and the 2022 MTBS respectively.
According to FNB- there are several positives for the agriculture sector and the first being the required allocation to deal with the energy crisis as loadshedding has started to impact negatively on food production thus a potential threat to food security, says Paul Makube, Senior Agricultural Economist, FNB Commercial.
“A total debt-relief of R254 billion will go a long way in enhancing operations and ensure a speedy recovery to its energy fleet. Crumbling infrastructure in terms of roads, rail, ports, as well as poor services at municipal level have been a bone of contention and the allocation of R351.1 billion for transport and logistics is welcome but implementation is key.
Agribusiness will benefit from being included in the refund of the Accident Fund levy for diesel used in the manufacturing process given the huge costs associated with operating generators for extended periods due to load shedding. Further, the general fuel levy and the Road Accident Fund levy has not been increased thus alleviating pressure due to the already high fuel costs,” says Makube.
Makube went further to point out, the troubled sugar industry will breathe a sigh of relief as the Health Promotion Levy has been kept unchanged for the next two years which provides room for further engagement and further allowing the industry to explore more product diversification.
Eskom has recorded its worst-ever performance in supplying electricity to the economy this year, disrupting businesses and households and damaging perceptions of South Africa. Interventions so far to address Eskom’s difficulties in sustaining a reliable electricity supply have not yielded results as load-shedding has worsened in recent days.
“While we welcome the financial measures Minister Godongwana outlined to alleviate Eskom’s debt, which will assist with its running income and expenditure, we are aware that this intervention will not give the country urgently needed electricity in the near term.
“We believe that the acceleration in the tariff path as outlined by the National Energy Regulator of South Africa will not slow down,” says Henk Langenhoven, Minerals Council’s chief economist.
The downside risk of no additional electricity coming onto the grid was flagged by the minister, as a serious economic risk. No alleviation of the current electricity constraint could slow the economic growth rate to 0.2% for 2023 and 1.3% in the next two years up to 2025.
“We welcome the tax break of 125% in the first two years on investments by businesses in renewable energy projects. This is a significant development to encourage the private sector to bring their more than 9 gigawatts of renewable energy projects into production as quickly as possible,” says Langenhoven.
The tax rebate can only be claimed on renewable energy projects commissioned before the end of March in the 2024/25 financial year.
Today, we received news that its CE Andre De Ruyter has resigned with immediate effect, following damning allegations levelled against top ANC senior officials.
In response the utility said it was working around the clock to appoint acting CEO as speedily as possible.
Strange enough there was no budget allocated for new electricity minister, yes, your guess is just good as mine.
Areas that have been impacted by floods has been allocated funds as part of ‘emergency relief’, fuel has not been increased, tax still remains and only ‘sin taxes’ increased slightly.
BLSA CEO Busisiwe Mavuso says: “It was a sensible budget which tried to make sure there was something for everyone in it. There was something for SMMEs, there was something for businesses broadly, there was something for grant recipients, for employees for homeowners. It was really balanced and the markets will react positively because he addressed the country’s critical problem areas while maintaining fiscal discipline.”
The Economic Freedom Fighters president Julius Malema says the measures announced by the Finance including tax relief for solar panels, will not benefit poor South Africans.
He says the approach is elitist as the majority of South Africans do not fall into that tax bracket.
Malema has also criticized the extension of the social relief of distress grant.
“It cannot be that we always annually celebrate that there’s R30 billion or so to be spent on R350. We should be speaking about reducing that amount because so many jobs have been created, solutions that are practically impossible to implement.”
Image (Finance Minister Enoch Godongwana’s 2023 Budget Speech has been welcomed by many despite on-going challenges).
