By Dr Chris Blair, CEO of 21st Century
IN the unfolding narrative of South Africa’s economic landscape, the 2024 budget speech by Finance Minister Enoch Godongwana stands as a pivotal chapter, articulating a fiscal strategy meticulously designed to navigate the tumultuous waters of economic uncertainty without resorting to the imposition of onerous tax burdens. By electing to leverage the nation’s Gold & Foreign Exchange Contingency Reserve Account for significant funding, the strategy underscores a commitment to fiscal prudence whilst eschewing major tax hikes, a move that notably sustains the VAT, wealth tax, and levies on fuel and the Road Accident Fund at their current levels for an unprecedented third consecutive year.
This budget, with its tempered optimism, projects a gradual ascension in economic growth, from a modest 0.6% in 2023 to an anticipated 1.8% by 2026, alongside a promising reduction in consumer price inflation. The government’s fiscal blueprint envisages the attainment of a primary budget surplus, underpinned by strategic tax adjustments aimed at mitigating fiscal pressures, including the adoption of a global minimum corporate tax of at least 15% and fostering incentives for the burgeoning electric vehicle sector.
Yet, the essential question arises – what ramifications does this budget hold for the typical South African? The multifaceted implications of the budget reveal a tapestry of impacts. On one hand, the restraint of significant tax increments offers a semblance of relief amidst prevailing economic fluctuations, while on the other, the strategic utilisation of reserve funds to augment public sector wages in critical services heralds a reinforced allegiance to social expenditure.
Delving deeper into the individual impacts, the decision to maintain the current VAT rate alongside unchanged wealth tax and levies directly influences the cost of goods and services, thereby stabilising consumer expenses. However, the absence of adjustments in personal income tax tables to counter inflationary pressures ominously looms as a potential detriment to disposable incomes, heralding the phenomenon of “bracket creep” and the consequent erosion of real disposable income.