A comment on February’s National Budget Speech by Stuart Kantor, Director, Kanan Wealth
In many ways, if South Africa was a person, it would be a trapeze artist, constantly navigating the thinnest of tightropes. Our nation seems to be locked in a perpetual balancing act and this year’s National Budget was no different. The Budget reflected an approach of providing some measure of care for the destitute and unemployed while appeasing taxpayers and international creditors. It’s still about respecting the past and honouring our future.
Thanks to Eskom, Transnet, softer global demand and muted commodity prices, this year National Treasury found itself with limited revenue to play with and an economy very much in need of support. South Africa’s public debt burden has risen sharply and debt service costs – the cost of paying off interest on the debt – have meant that tax revenue allocations have not been allocated as effectively.
The good news is that Treasury has planned well for the above-mentioned factors and last year’s Budget and this year’s reality are in line with estimates. Bad planning and missed estimates are what cause panic, and for this we need to be proud of our well-managed National Treasury. With Eskom and private business having adapted to a level of load shedding and with the fast-acting private sector, for this financial year, National Treasury sees faster revenue growth and a slowing of costs.
While this is good for the country’s income statement, it means no respite was offered to taxpayers. Tax tables remained unchanged, but inflation means tax revenue will increase. Sin taxes (taxes on tobacco and alcohol products) increased by more than inflation.
Effort to reduce our National Debt means that the cost of living will remain high and Government spending will be limited. Ironically, the public sector wage bill will increase because of inflation, but real wages won’t increase. In other words, public sector workers will receive no meaningful respite from inflation.
Treasury has also used reserves of gold and foreign currency to reduce public sector debt and we can only hope this isn’t the beginning of another bad habit. Let’s hope our government understands the need not to stare a gift horse in the mouth!
Housing and Policing have been made top-spending priorities with a reduction in spending for recreation and culture.
But it is important to remember that South Africa is not alone. Globally, the cost of living is affecting many families. Governments are grappling with social and geopolitical complexity. Granted, what many other countries have is a government that doesn’t self- sabotage. And, other countries have national pride. But the South African Trapeze has come a long way and must now navigate a critical election. I am excited by the feedback of many analysts who have suggested that the ANC is losing many bad apples and that there is some hope for meaningful coalitions .
Sometimes, when I close my eyes and try to see the future, I see a trend where the government has quietly enabled private security, health care, energy, and logistics. It’s a government that may quietly be stepping out of the way, enabling the greatest democracy that Africa has ever known.
BE SURE TO CAST YOUR VOTE ON WEDNESDAY, 29TH OF MAY.
Stuart Kantor, an independent wealth manager, holds a BBusSci degree with Honours in Finance, a SAFEX Junior Dealer Qualification, and a Post Graduate Diploma in Financial Planning. He is a Director of Kanan Wealth, a financial planning and wealth management advisory business in Cape Town.
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