This budget will 'strangle the taxpayer'
Prominent South Africans react to the 2018 budget speech
An increase in the fuel levy and a slide in state finance were among the concerns raised when Times Select approached experts for comment on Finance Minister Malusi Gigaba’s budget speech. Read their responses below.Efficient Group chief economist Dawie Roodt
“As expected it was not a good budget. It is strangling the taxpayer and left many questions unanswered including the issue of state-owned enterprises. The minister talked about strengthening the Eskom balance sheet. But what does that mean? Not enough was done to cut spending. The slide in state finance has not been halted and state debt will reach record lows in the next few years, which will lead to a ratings downgrade. I understand the grant increase, which was probably done to balance the VAT increase.”Economist Thabi Leoka
“I was satisfied overall with the budget by the minister, but as they say the proof is in the pudding. I’m glad about the one percentage point increase in VAT, which I think was necessary because of the huge GDP shortfall and bad debt deficit. People need to understand that [raising VAT] is not always regressive.
“It widens the number of food products that are zero-rated, which protects the poor. The lack of detail in stimulating economic growth was a concern and there was no mention on the minimum wage and how it would affect expenditure. The minister also failed to mention any changes in the size of cabinet and what effect that would have.”Sygnia Asset Management CEO Magda Wierzycka
“The one percentage point increase in VAT is clearly regressive but it was the only available and effective measure to plug the budget deficit hole. Hopefully some relief will come to the same consumers from interest rate cuts in the near future given the low inflation numbers.
“The relaxation of foreign exchange controls by increasing the foreign allowance for institutional investors (effectively retirement funds can now invest 30% offshore and another 10% in Africa) comes at exactly the right time as, given the strength of the rand, very few institutional investors are likely to utilise the increase.
“The phased in approach to funding free education is sensible given the strain on the budgetary processes. It is a good balance between ensuring access to quality education for the poor, without being unaffordable. There is also a nice recognition of the relevance of fintech (financial technology) to South Africa hidden in Annexure F, which recognises that fintech has the potential to improve completion, reduce costs and enhance inclusion.
“Under the circumstances, it is a well-balanced, pragmatic budget given the difficult circumstances, which is likely to avert further credit rating downgrades.”South African Chamber of Commerce and Industry CEO Alan Mukoki
“While this was a budget announced during very tight economic times with low growth, an adverse credit ratings environment and high debt to GDP and deficit rates, we believe it was a balanced act under the circumstances. The 52c-per-litre fuel levy increase is likely to have a negative inflationary effect which will put many businesses on the back foot, given that fuel is a high input cost in many businesses.
“Many consumers and employees will be adversely affected by this high levy, which will be coupled with a one percentage point increase in VAT. The VAT increase may appear marginal. However, the knock-on effect will impact revenue growth in many businesses and this is something SA should watch closely.
“The pledge by the minister to pay suppliers on time is a welcome, urgent and necessary step. We would have wanted to hear from the minister on the funding capital gaps affecting the SOEs. This raises a critical weakness as the SOEs play a large role in the economy of SA.
“Overall any increase on taxes in a low-growth environment would be a challenge. We support the minister’s decision not to increase taxes on corporate tax and personal income tax.”