#Budget2019 in a nutshell

Eskom (& other SOEs)

  • Government not taking on Eskom’s debt
  • Setting aside R23bn a year to support Eskom during “reconfiguration”
  • Support conditional on appointment of chief reorganisation officer (CRO)
  • Finance Minister Tito Mboweni likens reorganisation to “curatorship”
  • Mboweni: The president is right when he says Eskom will not be privatised
  • Contingency reserved revised upwards to R13bn for 2019/20 to respond to possible requests for financial support
  • Support budget neutral “as far as possible”
  • Cabinet considering proposal to end guarantees for operational purposes
  • Mboweni: Summit must be held on where to go with SOEs

Growth and other key figures

  • GDP growth for 2019 revised downwards from 1.7% to 1.5% (2020: 1.7%; 2021: 2.1%)
  • Tax revenue for 2018/19 to undershoot mini-budget estimate by R15.4bn, half of this due to higher than expected VAT refunds
  • Consolidated budget deficit to widen to 4.2% in 2018/19 from mini-budget estimate of 4% (2019/20: -4.5%; 2020/21: -4%)
  • Gross debt to GDP ratio to stabilise at 60.2% in 2023/24, higher than mini-budget projection of 59.6%
  • In 2019/20 government will spend R243bn more than it earns (revenue of R1.58trn and spending of R1.83trn)
  • SA is borrowing R1.2bn each weekday
  • Interest expenditure R1bn per day

Tax announcements

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  • No change to personal income tax rates or brackets, slight adjustment to rebates (Revenue of R12.8bn raised this way – collection by stealth)
  • No inflationary adjustment to medical tax credit
  • No changes to tax rates for corporate income tax or VAT
  • Employment tax incentive of up to R1 000 can be claimed for employees earning up to R4 500 (previously R4 000)
  • Sugar tax increase from 2.1 cents per gram to 2.21 cents per gram
  • Carbon tax of 9c/litre on petrol and 10c/l on diesel effective from June 5
  • General fuel levy increase by 15c/litre
  • Road Accident Fund levy increase by 5c/litre
  • Plans to tax electronic cigarettes and tobacco heating products
  • Excise duty on cigarettes to rise by R1.14 to R16.66, and 12 cents to R1.74 for can of beer
  • New Commissioner to be appointed “in the coming weeks”
  • Judge Dennis Davis to assess tax gap (difference between tax due and tax collected)
  • Review of explosion of duty-free shops in SA planned
  • Introduction of export tax on scrap metal explored

Expenditure

  • Baseline expenditure adjusted downwards by R50.3bn since mini-budget
  • Half of the reduction come from adjustments to spending on compensation
  • Older public servants may retire early and gracefully, leading to savings of R4.8bn in 2019/20; R7.5bn in 2020/21 and R8bn in 2021/22
  • Limits on overtime, bonus payments and pay progression planned
  • Staffing of diplomatic missions considered “unjustified”, to be reviewed
  • No salary increase for members of Parliament, provincial legislature and executives at public entities
  • Provisional allocations for financial support to Eskom and Infrastructure Fund offsets baseline reduction
  • Expenditure ceiling revised upwards by R16bn over three years
  • Allocation to Jobs Fund to rise to R1.1bn over three years
  • Old age grant rises R80, foster care R40 to R1 000 and child support grant to R420 in April and R430 in October
  • Help-to-buy subsidy helps first-time home buyers purchase a home. R950 million for pilot phase over three years

Infrastructure Fund

  • Central pillar of budget and reprioritisation
  • It will accelerate R526bn of on-budget projects by bringing in the private sector and development finance institutions
  • In several cases, the private sector will design, build and operate key infrastructure assets
  • Government to commit R100bn over next decade

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By Inge Lamprecht