Like the 2018 Medium-term budget policy statements (MTBPS) this budget was very closely watched with many hoping for clarity on future direction. There appears to be more questions than answers in the current environment and more groups with different views and interests than what the fiscus can allow.
The Minister of Finance, Mr. Tito Mboweni in his first budget speech spoke honestly about the challenges facing South Africa and presented a budget built on six fundamental prescripts, which are:
- Achieving a higher rate of economic growth
- Increasing tax collection
- Reasonable, affordable expenditure
- Stabilising and reducing debt
- Reconfiguring state-owned enterprises
- Managing the public sector wage bill
In a South African context these six areas have many faces and will require good leadership from Government. At the same time the Minister said that he expects a slower growth for South Africa, than what was predicated in the Medium-Term Budget Policy Statement (MTBPS). However, the Minister remained optimistic in saying that the country is continuing on a steady recovery trajectory, after the 2018 technical recession. It is expected that real GDP growth in 2019 will rise to 1.5 per cent, from an excepted 0.7% in 2018, and then strengthen moderately to 2.1 per cent in 2021.
From the Minister’s speech, is clear that significant emphasis will be placed on redirecting SARS to focus on tax collection, and we are encouraged by the Minister’s comments that specialist units will be (re)introduced and the appointment of a new Commissioner. We believe these are steps in the right direction to increase tax collection.
The Minster also alluded to some expenditure cuts. However, expenditure will be higher than income, with an expected short fall of R243 billion for the year. Some of the cost cutting measures included in the speech is an “early retirement framework” for public servants. This will save an estimated R4.8 billion in 2019/20, R7.5 billion in 2020/21 and R8 billion in 2021/22.
Guided by the President, the budget spend allocation focused on five priorities including the acceleration of inclusive economic growth and creation of jobs. The allocation of R1.1 billion over the next three years to the Jobs Funds and a further R481.6 million allocation to expand the small business incubation programme of the Small Enterprise Development Agency is very promising and well supported.
Other priorities also include the improvement of the education system and the development of skills for the future. A total of R30 billion has been allocated to build new schools. Considerable spend allocations were also made towards improving the conditions of life for all South Africans, especially the poor; measures to fight corruption and state capture as well as to strengthen the capacity and capability of the state to address the needs of the people.
The R5.5 billion of investments made from the public and private sectors towards agriculture, especially for emerging farmers aligns well to SAIA’s own Agricultural Insurance Programme. SAIA continues to work towards finding affordable insurance solutions for emerging and commercial farmers. Without insurance farmers are at risk and could find it difficult to obtain finance.
The budget also accommodated some of the State-Owned Enterprises (SOEs) however the Minister questioned whether South Africa still needs some of these enterprises. It is especially Eskom’s allocation of R23 billion per year that will place pressure on the fiscus.
Overall this budget is a well-balanced budget and provide South African with a better view of future.
For more information contact:
Nico Esterhuizen, General Manager Insurance Risks