Some tax relief, some social protection as more tax revenue tackles debt for SA ‘to turn the tide’ 

“Even as we face steep and daunting challenges, like we have done in the past, we will overcome. To do so, we need to strike a critical balance between saving lives and livelihoods, while supporting inclusive growth. This budget presents this balance,” said Finance Minister Enoch Godongwana in his prepared speech.

It’s sustainability alongside social protection. But this upbeat spin comes with cautions that without the fundamental structural economic reforms for economic growth, investment and jobs, the nation will struggle to turn the tide.

“In the absence of higher economic growth that supports long-term improvements in revenue collection, any proposal to fund permanent additions to public expenditure require careful scrutiny,” said the Budget Review in a clear reference to the vocal call from civil society for a Basic Income Grant (BIG), or income support for all those aged 18 to 59.

Speaking to journalists before presenting his maiden Budget, Godongwana said National Treasury is reviewing all of government's various grants and support from community work programmes to the monthly R350 relief of social distress grant that’s been extended for another 12-months to March 2023. 

“Our view is you don’t fund permanent programmes using temporal revenue because over time you will hit a problem… We look at the totality (of grants and social interventions).”

For now, government has some wiggle room. That’s courtesy of the additional R181.9-billion the South African Revenue Services (Sars) has collected. It’s over R60-billion more than the November 2021 Medium-Term Budget Policy Statement (MTBPS).

“(I)n these trying times and without compromising our ability to collect revenue, we have managed, through these tax proposals, to keep money in the pockets of South Africans, and to create conditions for greater investment in the economy,” said Godongwana in his prepared speech.

Those extra billions have eased government’s debt headache at a time when economic growth is pegged at a bit better, but still lukewarm 2.1% in 2022, against anticipated 4.8% inflation.

Debt to gross domestic product (GDP) stands at 75.1% in 2022, lower than forecast in November’s MTBPS, while the Budget deficit improves from the anticipated 7.8% to 5.7%.

However, debt totalling R5.43-trillion in 2022 debt service costs remains government’s fastest-growing expenditure item — and it exceeds health, policing and basic education budgets. 

In 2022 that means paying R301.8-billion of the overall R2.16-trillion Budget.

Put differently, debt service costs are set to increase at 10.7% between 2021 to 2025. In comparison, economic development spending is projected to rise 8.5% over the same period, and community development spending at 7.9%.

It’s about as stark an illustration as any of the tough balance of the political and economic tightrope Godongwana must walk, at times also in ideological headwinds.

But now for the good news.

Individuals will get a total of R5.2-billion in tax relief by adjusting tax brackets — and some additional medical aid tax credits — while corporate tax is dropped one percentage point to 27%.

From April the R1,890 monthly pension increases by R9o rand, with another R10 hike in October as does the disability grant. R20 more a month goes to increasing the childcare grant to R480. 

And the Employment Tax Incentive, or the youth wage subsidy, is increased to R1,500 a month for every young work-seeker a company employs.

On the jobs front, the Presidential Employment Stimulus gets R18.4-billion out of the overall jobs allocation of R76-billion.

The bounce-back small business support makes available government-guaranteed loans of R15-billion, and later on also equity support.

In a highly unusual move, the fuel levy remains the same. National Treasury indicated in the budget documentation a review of the formula that also pays for the Road Accident Fund (RAF) is underway.

“We think it’s a good story to tell (that) we can do all of these things without raising taxes,” the finance minister told journalists in the traditional pre-Budget briefing.

Some headaches remain, not least of which is Eskom — from its around R400-billion debt and slow unbundling. The troubled power utility must take additional steps to cut costs, sell assets and improve operations. Reliable electricity supply is key. 

On the public sector wage front, until negotiations are settled, civil servants will continue to receive the monthly non-pensionable cash payment ranging between some R1,200 to just under R1,700, according to a recent circular.

“We have to restructure that (public service) wage bill. That’s what we are aiming at,” Godongwana told journalists. It’s longer-term thinking.

Meanwhile, the carbon tax on fuel does increase — by one cent per litre from 6 April 2022, while the plastic bag levy goes up by three cents to 28c per plastic bag. And the health promotion levy increases to 2.31 cents per gram of sugar.

As usual, sin taxes go up — again. A packet of 20 cigarettes will cost R1.03 more, a 340ml can of beer goes up 11 cents; it will cost 33 cents more for a 750ml bottle of fortified wine, or in the case of sparkling wine, 76 cents.

A new vaping tax of R2.90 per millilitre kicks in in January 2023.

Amid talk of prudent fiscal policy, debt reduction and public finance sustainability, the 2022 Budget Review highlights steps taken in government’s economic recovery plan, including the red tape reduction unit in the Presidency.

However, unlike previous years, the Budget Review quick take out numbers or highlights on key Sona priorities like, for example, the fight against crime and corruption. 

Only in the 956-page Estimates of National Expenditure does it emerge the National Prosecuting Authority’s special Investigating Directorate gets R426-million more over the next three years, targeting 27 State Capture cases by the 2024/5 financial year. Allocations to the Special Investigating Unit (SIU) increase to R976.2-million in 2022, from R751.6-million in 2021.

Still, on the back of an improved debt outlook, Budget 2022 is firm on its overwhelmingly pro-social protection stance. It’s glass-half-full messaging in the context of 2.2-million jobs lost due to the Covid-19 lockdown that has led to 46.4% joblessness on the broad definition of including all those too disillusioned to even try looking for work.

Repeatedly the Budget documentation highlights that 59.5% of overall expenditure goes on social services, or R1.3-tillion, up from 58.2% in the previous 2021 Budget.

Of that R1.3-trillion social spending, R441.5-billion goes to learning and culture, with basic education getting the lion’s share of R282.8-billion, and R46.1-billion to the National Student Financial Aid Scheme (NSFAS).

Social services are allocated R364-billion all of which, except R31.9-billion for administration, goes to grants.

Health gets R259-billion, most of which is allocated to district health services (R115-7-billion), but also R2.3-billion for Covid-19 vaccines. 

Community development is allocated R236.3-billion, with human settlements, water and electrification getting R58.7-billion. The municipal equitable share is R87.3-billion to support council service delivery.

Economic development, including agriculture, industrialisation policy like various sector masterplans for poultry, chicken and clothing, is allocated R227.1-billion.

Peace and security that includes police and Home Affairs, gets R220.7-billion. Some R10-billion are being reprioritised for information communication technology (ICT) for Home Affairs and others.

The devil is in the detail 

While transfers to provinces and local government have not been slashed again, National Treasury says it will ensure the incentives to the provincial road maintenance grant incentive are fully based on recent road data. And changes are underway to include the school infrastructure backlog grant into the education infrastructure grant. Not all schools in South Africa have even just adequate sanitation.

As local government gets R4.2-billion more in 2022, the R800-million neighbourhood development partnership grant is tied to the Presidential Employment Initiative. In a clear sign that cities are unable to create public transport systems, the public transport network grant is reduced over the next three years.

Much of this has been made possible as tax revenue hit R1.55-trillion, up from the R1.37-trillion the 2021 Budget anticipated.

Some of that is due to Sars “enforcement activities” which collected an additional R5-billion, but also as the tax collector “intensified work to counter criminal and illicit activity”. 

Sars’ additional tax collection emerged key for the budgetary wiggle room — and allowed the finance minister to repeatedly state in his speech government’s commitment to economic reconstruction and recovery for long-term prosperity of South Africa, alongside saving lives and restoring livelihoods.

“We are turning the tide. We have the capability to change things around,” Godongwana told journalists.

The proof is in the pudding. DM