(2minutes read)
· The overarching objectives of the Budget were to kick-start
the economy and address the growing debt burden. It remains to be seen
how these vexatious problems that are haunting the economy are going
to be tackled in the coming days.
· The most controversial issue in the budget is the proposal
to cut the state’s wage bill by R160.2 billion over next three years.
Budget 2020 of South Africa was presented the other day by Finance
Minister Mboweni. The overarching objectives of the Budget were to
kick-start the economy and address the growing debt burden. It remains
to be seen how these vexatious problems that are haunting the economy
are going to be tackled in the coming days.
The most controversial issue in the budget is the proposal to cut the
state’s wage bill by R160.2 billion over the next three years.
Treasury warns of ever-rising debt repayment costs, but how this will
be viewed by the powerful trade unions have to be seen. Already,
through their press reactions, they have expressed their anguish
against the move of the government, which they dub as draconian. They
fear about the wage cuts in the given predicament of inflation and
massive unemployment, will have a damaging effect on their
subsistence. Will the private sector come to the rescue of the
government by creating jobs to compensate for the job lost in the
public sector has to be seen?
One cannot blame the finance minister for the apparent harsh budget on
the salaried class. He is in the midst of an unenviable environment of
low economic growth, a rising budget deficit and record-high
unemployment. Yet, the finance minister spared the people from major
tax hikes, contrary to the expectations of the financial analysts, who
predicted at least a mild hike in taxes. Of course, there are new
levies like fuel and Road Accident Fund, the incidence of which will
fall squarely on the common man.
The government’s expectation is that the economy would grow by just
0.3% in 2019. Last year also, the government has taken a number of
measures to cut down the expenditure by R27 billion over three years
by incentivizing early retirement in the public sector, which did not
have much of an impact. The Treasury is now proposing a R160.2 billion
cut in the wage bill for state employees in national and provincial
departments over three years. Treasury said civil servants’ salaries
had grown by 40% in real terms over the past 12 years. The equivalent
increases in productivity have not taken place.
The other salient features of the Budget are:
1. Proposal to reduce corporate income tax to 28%, though the time
of implementation is not mentioned.
2. Social grants, such as old age grants, child support grants
etc to increase between 4% and 4.7%.
3. Setting up of a new State Bank to extend access to financial
services to all South Africans, which will be a “deposit-taking
institution”.
4. Measures for national debt reduction, since servicing debts are
a major outflow of resources.
5. Setting up a Sovereign Wealth Fund to source funds from sale of
spectrum, thiough details are not spelt out.
