One thing we can agree on as exclaimed by Finance Minister, Tito Mboweni, during the 2020 Budget Speech, it is that, “we must get more value for our money”…
This was the focus of the budget speech, highlighting the strides achieved in developing the country and the progress made in cutting back on wasteful expenditure, as committed in the 2019 Budget Speech.
The outlook for 2020/21: Revenue is projected to be R1.58 trillion, or 29.2 per cent of GDP; expenditure is projected at R1.95 trillion, or 36 per cent of GDP; and the budget deficit is at R370.5 billion, or 6.8 per cent of GDP in 2020/21.
What does this mean for the average South African?
Simply put, the country’s economy is not growing at a preferable rate and will require a combined effort from all South Africans. It would seem the country’s needs are limitless; however, they have been prioritized by government with the following focus areas to note
1. Income tax relief and more
South Africans can look forward to generous tax savings on personal income tax. Consumers who earn on average R460 000 a year, will see their taxes reduced by nearly R3 400 a year, while those who earn on average R265 000 per annum, will see their income tax reduced by over R1 500 over a period of 12 months.
Adding to tax relief, the Minister announced a short and sweet zero VAT increase, despite apparent rumours masquerading amongst South Africans in anticipation of yet another VAT increase.
2. Annual tax-free limit increase
The Treasury has increased the annual limit on contributions to tax-free savings accounts from R33 000 to R36 000 as from 1st March 2020, which should help South Africans with an overall improved savings culture.
3. Stable electricity supply
Government has promised to do whatever it takes to ensure more stable electricity supply; however, this commitment comes at a hefty price of R230 billion over the next 10 years to achieve the restructure of the electricity sector.
4. Youth employment
The 52% youth unemployment statistic remains unchanged with a desperate need for government intervention. Currently, 8.2 million young people between the ages of 15 and 34 are not in education, employment or training, and South Africans will need to wait for the 2020 Medium Term Budget Policy Statement to know more about the government’s plan.
5. Future forward education
With a diversified economy and a young population, government is focused on reducing wasteful expenditure to redirect funds towards educational programmes, as well as hiring and improving infrastructure in schools.
Investment will go towards new schools, replacing schools constructed with inappropriate materials, and providing them with water, electricity and sanitation.
In 2020/21 the maths, science and technology grant will also introduce coding and robotics to learners in grades R to 3 as announced by President Cyril Ramaphosa in the 2020 State of the Nation Address.
6. Social grant increases provide some relief
While the grants provided are still considered to be low in in relation to South Africans’ basic living expenses, the funding of the various social groups including children, war veterans, foster care and old age citizens, helps to alleviate inequality and protects the most vulnerable. More than 18 million disenfranchised South Africans receive a grant, which is a lifeline for many.
The social grants have increased as follows:
- R80 increase for the old age, disability and care dependency grants to R1860 per month
- R80 increase in the war veterans grant to R1880
- R40 increase for the foster care grant to R1040 per month
- The child support grant will increase by R20 to R445 per month
7. Health is wealth
South Africans can expect increased bio security to reduce animal related diseases, as government has allocated R495.1 million to the Department of Agriculture, Land Reform and Rural Development towards these safety measures.
8. Good news for entrepreneurs
The Minister exclaimed that with the advantaged backing of the tax system which will now support start-ups, entrepreneurs will contribute to igniting the economy. Startups can look forward to preferential small business tax regime, the VAT registration threshold and the turnover tax.
9. Cultivating a well-travelled society
The tourism sector is a huge investment opportunity for the country and a major contributor to the GDP. South Africans can expect a formalised tourism levy, which will affect domestic and international travel, however beneficial for the country.
10. Prosperity driven by sin tax
It is no surprise that our necessary evils call for punishment with foresight and financial implications. What better way to ensure the growth of an economy than by taxing the so called “sins” of South Africans.
The increases were listed by the Finance Minister as follows:
- A 340ml can of beer or cider will cost an extra 8c
- A 750ml bottle of wine will cost an extra 14c
- A 750ml bottle of sparkling wine an extra 61c
- A bottle of 750 ml spirits, including whisky, gin or vodka, will rise by R2.89
- A packet of 20 cigarettes will be an extra 74c
- A 25 gram of piped tobacco will cost 40c more
- A 23-gram cigar will cost an extra R6.73
Together with a shared determination, we can all act in the interests of sustainable growth in South Africa, by making smarter financial decisions.
As per the comments by Tito Mboweni, “For a fast-growing economy, we need to make sure our children are well educated, our people are healthy, and our money invested properly”.
Why not take control of this reality and speak to your local financial adviser today, about how you can protect your lifestyle and prosper in 2020.
References: all4women.co.za/1961003/money/money-matters/budget-speech-10-things-you-need-to-know-how-it-affects-your-pocket
