How to make sense of all the cents: 2019 Budget speech analysis

Its 2019 and we want financial freedom. It is no secret that South Africa has been performing economically poorly of late. With the downgrade rating from S & P and Moody’s, the arbitrary changes of finance ministers, of which the last two had links to the Guptas and state capture. Currently, we have Minister Tito Mboweni, the trusted former governor of the South African reserve bank. He was personally requested by the President to come out of retirement and help put the country’s finances back on track. With all this on his shoulders, Minister Mboweni addressed the National Assembly and the republic on the 20th of February. This is an analysis of the National Budget speech of 2019.

Let’s get straight to it then

In 2018 we experienced a technical recession. This means that we had negative economic growth for at least 6 months, (two consecutive quarters). The Finance Minister in the National Budget Speech, predicted that in 2019 GDP will rise by 1.5 % and in 2021 by 2.1%. That’s very slow and close to stagnation, but you know what they say about the proverbial tortoise, slow and steady wins the race.

There will be no change to personal and corporate income tax brackets, but there is what is known as bracket creep, which means you will be paying more tax due to inflation. Bracket creep is expected to raise R12.8 billion. There is an increase in sin tax. There will no longer be Value Added Tax on “white bread flour, cake flour and sanitary pads” from April 1, 2019, according to the National Treasury’s Peoples Guide to the Budget.

Unfortunately, “fuel levies will increase by 29 cents per litre for petrol and 30 cents per litre for diesel”. There is also an introduction of a carbon tax on the 5th of June 2019, which will further increase the price of fuel and electricity. Therefore, we need to start finding renewable sources of energy.

State-owned enterprises (SOEs) such as SAA, SABC, Denel and Eskom…etc “pose a very serious risk to the fiscal framework” as many of them have requested “state support just to continue operating.” Minister Mboweni thought “isn’t it about time the country asks the question: do we still need these enterprises?” What is implied by this question is that if push comes to shove, many SOEs might become privatised. The Minister seems to differ on ideology with his fellow partisans. By saying “the private sector is the key engine for job creation” and at the pre-budget briefing said, “emotional attachment to SOEs in the post-Soviet era is meaningless”. State-owned enterprises are companies in which the South African state owns 51% (majority shareholding) in order to ensure that these businesses have the average citizens interest at heart as they provide core services such as electricity.

Eskom is receiving a R23 billion a year for the next three years (a total of R69 billion) bailout from government, whose money is mainly the tax payer’s money. This is the biggest bailout in South African history. This money is to assist in the institutional separation of Eskom, into three subsidiary entities, “the fiscal support is conditional on an independent Chief Reorganisation Officer (CRO) being jointly appointed by the Ministers of Finance and Public Enterprises”. Currently, the energy company is R419 billion in debt. If an SOE seeks financial assistance from the state, they will be assigned an external CRO who will “undertake a full operational and financial review” of the company.

This year South Africa is expected to make R1.58 trillion but spend R1.83 trillion, “that means we will spend 243 billion more than we earn”. Therefore, South Africa is in debt and will continue to be until 2023/4 according to the finance minister who added, “restoring our finances and fixing our state-owned enterprises will take great courage. But it can be done”.

South Africa’s financial woes isn’t good news for the average taxpayer as there is what is referred to as ‘black tax’, which is what the 2018 Old Mutual Savings and Investment Monitor described as “South Africans are financially under pressure, with many supporting their extended families”.

The national budget is redistributive meaning “taxes raised in wealthier areas fund poorer provinces and municipalities”. And that, social grants will increase by 5%. There are 17 million social grants given every month in South Africa and the state has portioned R567 billion for this, this year. These efforts are to alleviate the horrors of poverty.

Government plans to save R27 billion over the medium term (next three years) by reducing the number of public servants by means of encouraging older civil servants to retire early. The minister also mentioned in the pre-budget briefing that he thinks government employees are being paid too much.

It is estimated that in the next three years the state will spend R5.87 trillion, “the largest allocations are R1.2 trillion for learning and culture, R717 billion for health services (including National Health Insurance) and nearly R900 billion for social development.

The Minister agrees “Data costs must fall!” and will provide funding to ICASA (Independent Communications Authority of South Africa) for “the licensing of spectrum”. This means there will be state subsidised internet, this is good news.

R19.8 billion from the national budget is going to industrial business incentives, “of which R600 million has gone to the clothing and textile competitiveness programme” this will “create about 25 000 new jobs over next three years”.

On land, R1.8 billion is set aside for land reform for the medium term. R3.7 billion is to be assigned to “emerging farmers seeking to acquire land to farm”.

The government will spend R30 billion on maintaining and building new schools this year. R2.8 billion is to be spent replacing pit latrines (long-drops) in schools, as a few precious South African children from disadvantaged backgrounds have fallen in them and died, this is a disgrace.

There will be a maths and science grant to encourage future technological innovation. We hope young Girl Bosses will be encouraged by this and step boldly into these historically male dominated fields.

There will now be free sanitary products “to girls in the country’s poorest schools” through the Sanitary Dignity Project.

For the next three years, “the government will spend R111.2 billion to ensure that 2.8 million deserving students from poor and working-class families” can go to university and TVET colleges. R105 million will be allotted by government to the Student Housing Infrastructure Programme, to provide public student accommodation.

In exciting news, money is going to be invested in developing arts and culture in the country. The minister announced plans for “a new national theatre, a new national museum and also consider financial support for the National Archives” and a national orchestra and ballet troupe.

Informal settlements will be upgraded to “enable these households to have access to basic amenities” this will cost R14.7 billion. I can’t help but feel a sense of justice as living conditions for the poorest South Africans have to improve for us to be truly free from the injustices of apartheid and colonialism.

There is going to be a Help to Buy grant for “first-time home buyers” and government will spend R950 million over the medium term on this.

As a kid from parents who grew up in the rural areas, I am happy to hear that “R625 million is allocated to the Development Bank of South Africa, the Government Technical Advisory Centre and the Presidential Infrastructure Coordinating Commission… on a speeded-up basis, projects based on rural roads and water will be prioritised” If one would like more information on government spending check out the Vulekamali online portal.

Government has pledged R100 billion on infrastructure for the next 10 years. Currently, R526 billion worth of infrastructure projects are in the works. The state is looking to work with the private sector in the building of South Africa.

There will be a new Public Procurement Bill, announced by the National Treasury in the People’s Guide to The Budget whose amendments “will allow for greater participation of black, youth and women-owned businesses”. Seems like the government is for us Girl Bosses making ‘money moves’ in 2019.

On the other hand;


these sweet words, depending on whose ears it falls, can, however not detract from the wide budget deficit and huge debt that the public sector is struggling with: PwC sees a high probability of Moody’s Investor Service downgrading South Africa to non-investment grade this year

Lullu Krugel and Christie Viljoen, strategy and economists at PricewaterhouseCooper.

As South Africans and global citizens, we must take control of our destinies, individually and collectively. Hopefully, this information will empower you to do this.

Simi Gumede

A lover of love

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