Budget Speech 2023
On 22 February 2023, South African Finance Minister Enoch Godongwana delivered the annual Budget Speech for 2023/2024. The speech was headlined by the government’s pledge to take around 66% (R254 billion) of Eskom’s debt onto the national balance sheet and announced tax incentives for installing rooftop solar panels. The minister did keep taxpayers in mind as he did not disclose any significant change to the tax system for 2023 and took a very optimistic approach to economic growth.
The most significant talking point of the budget speech was that the government would take on R254 billion of Eskom debt. This was implemented to allow Eskom to channel funds into maintaining existing infrastructure and finding alternate avenues to secure electricity supply. The government did take on the debt with strict rules and conditions, for which Eskom is liable. R184 billion will be paid directly to Eskom over 3 years, and the government will add R70 billion to debt in 2025. However, the government was already paying R360 billion annually in debt, around 18% of the government revenue and projected to climb 9% annually.
However, the public has welcomed a tax incentive to individuals and businesses when installing rooftop solar panels to generate renewable energy. The government has pledged up to 25% in tax incentives (maximum R15 000) starting on 1 March 2023, lasting a year for individuals and 2 years for businesses. Some argue that most South Africans cannot afford essentials, let alone the costs of installing solar panels. Due to the high prices, this will not assist low-income households, which is most South Africans.
With the economy struggling after the pandemic, minister Godongwana optimistically projected economic growth of 0.9%, which is 3x higher than what the South African Reserve Bank projected. Although Minister Godongwana argued that the 2 institutions have different methods and metrics of calculating economic growth, we can all agree that with load-shedding hitting stage 8 in some parts of the country, not many can agree with this optimistic approach.
South Africans can breathe a sigh of relief as there will be no significant change to the tax system for 2023. There were no additional constraints on the taxpayer as levies such as fuel and the road accident fund remained at the same levels. However, there will be a 4.9% increase in sin tax (see table below). This is in line with inflation. The tax-free threshold for income has increased in line with inflation as well to R95 750 annually. Social grants were also increased, and the COVID social grant of R350 will continue. Shockingly, no announcement was made on the permanent basic income grant, albeit the campaign (#PAYTHEGRANTS) called for an R1 500 basic grant.
Sin taxes
| Increase in duty | |
| Can of beer (340ml) | 10c |
| Bottle of wine (750ml) | 18c |
| Bottle of whiskey/spirits (750ml) | R3.90 |
| Pack of 20 cigarettes | 98c |
| Cigars (23g) | R5.47 |
Source: Suren Naidoo. (Moneyweb.co.za, 2023)
Overall, the budget speech was positive. However, it lacks boldness and some risk-taking decisions to boost the SMME market, as promised in the SONA 2023. The minister seemed to have little room to manoeuvre as there was political and financial pressure. Do you think the minister did justice to the 2023 budget?
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