The Budget Speech has come and gone. Some of us waited expectantly to hear how it would affect us, while others got on with things, afraid of hearing bad news.
While it is tempting to bury our heads in the sand when it comes to money matters, the Budget Speech has a direct impact on our lives. It tells us about the state of our economy and fiscal outlook. It also tells us how government will raise and spend money. The Budget Speech paints a picture of what the spending priorities are (and what is not…), and where we can expect to see cuts in spending. It gives us insight into the state of the services we will receive from government, like healthcare, education, social security, housing and sanitation, all of which are important in our lives.
We don’t need a fortune teller to lay out the cards and tell us that times are tough. It’s been a difficult few years with rising debt, revenue shortfalls and the dire situation of the state-owned enterprises, Eskom being a case in point. Minister Tito Mboweni announced in the Budget Speech that our expected revenue stands at about R1.58 trillion, which sounds like a lot of money. However, our projected spending is in the region of R1.83 trillion. This means that we have a budget deficit of R243 billion and will have to borrow an estimated R1.2 billion a day. Government has adjusted baseline expenditure downwards, which means that there will be cuts in services, so we will have to monitor this carefully.
The economy is expected to grow at 0.7%, less than what is needed to address unemployment. Unemployment is at 27%, but when this is broken down, we see that unemployment is higher amongst women, at around 29.5%. A study on poverty trends shows that the bulk of the poor in our country are women. And we know that it is women who are more likely to spend their money on the well-being of others, in putting food on the table and taking care of others. This means that we have to be creative in generating our own jobs. The building of small business initiatives is important to addressing the job shortfall in the economy. So if you have a business idea, however small, now is the time to test the waters and see how you could make it work.
With economic outlook being what it is, we will need to tighten our belts. Taxes on luxury goods will go up, so for those of us who enjoy a cigarette and a glass of wine, we will now have to fork out a little bit more. But it’s not all bad news. As of April 2019, VAT on sanitary towels and bread and cake flour will be zero rated, which means that you won’t have to pay tax on these items. Government is also taking steps to root out corruption in SARS so that it is able to do its job in bringing in tax revenue. The worrying situation in state-owned enterprises is a priority and there will be stricter measures for government guarantees to SOEs. Government will also cut the public wage bill to save on salaries in the state. As part of this, Members of Parliament will not receive a salary increase this year.
So, there is no need to bury your head under your duvet. Minister Mboweni has emphasised that in turning the economic tide, the focus will be on five priorities. First is the focus on accelerating economic growth and job creation. Secondly, a large chunk of the budget will go into improving the education system and investing in skills. Third, we have to focus on improving the living conditions of South Africans, especially the poor. Fourth, we need to emerge from the trauma of state corruption and capture and fight it head on. Lastly, the capacity of the state will be strengthened to address the needs of its people.
You might be asking, ‘What does all of this mean for me?’ Well, if you are one of those people who runs for the hills when someone tells you to draw up a personal budget, now is the time to sit down, stay calm and look at planning your finances. Look at where you can cut costs and how you can put a little bit away for a rainy day. Plan your treats, the things that bring a smile to your face and joy to your heart, chocolate, massages, a night out… Take charge of your money by having a plan. Minister Mboweni has promised that government will fix the fiscal position, that the budget plants seeds for renewal and growth. He has also said that it is the duty of all of us to see that it grows strong, tall and fruitful. We can do this by keeping an eye on the money, both our own and that of the state. It is our job to hold government accountable for taking us into a time of renewal.
Written by Joy Watson