Minister of Finance Enoch Godongwana has managed to tread the fine line with his 2023 Budget Speech, delivering on a business-friendly Budget that provides relief and paves the way for economic recovery, amid an even more challenging economic and socio-economic environment than previous iterations.

His macro-economic aggregates are very much in line with what other economists expected - weak economic growth, high levels of unemployment and poverty and escalating consumer inflation - which is behind his extension of the Social Relief of Distress (SDR) grant.

Consumers are the forgotten quotient

Neil Roets, CEO of Debt Rescue agrees.  “In his 2023 Budget Speech the Minister offers hope to the business sector, proposing a budget that prioritizes economic growth – and rightly so. It’s disappointing that there is no emphasis in the Budget on assisting the SME sector, as they are the drivers of economic growth at a time when the country is at a tipping point, spurred on by the energy crisis and continual fiscal challenges.” 

“The elephant in the room is the 30.3 million South Africans currently living below the poverty line and battling to put enough food on the table, in the face of a cost-of-living catastrophe the likes of which we have never seen before,” he says.

According to President Cyril Ramaphosa, millions of South Africans cannot provide for themselves and their families. Ramaphosa substantiated this in his State of the Nation Address delivered on Thursday 9 February.  "The rising cost of living is deepening poverty and inequality," he said.

Although the continuation of the R350 per month social relief of distress (SRD) grant will pay nearly half the population – the shocking ratio who live below the poverty line – a stipend to feed their families, it is not a realistic long-term solution. 

Youth employment is critical

“Given our current unemployment rate of 32.9 percent  - one of the highest in the world - with youth unemployment highest at 63.9%, job creation is crucial,” says Roets. “While it’s encouraging that 1 million job opportunities have been created to date under the presidential youth employment initiative, the fact that job creation was not tabled in this year’s budget as a top priority, is a serious oversight,” says Roets.

We have a critical shortage of qualified artisans in the country. Minister of higher education, science, and innovation, Blade Nzimande, said in November (2022) that South Africa needs at least 60% of school leavers to pursue artisan-type training to meet the country’s demand for scarce skills. 

“How is government planning on turning this around?” he asks.

Energy crisis threatens food security

Today Godongwana proposed a total debt-relief arrangement for Eskom of R 254 billion. He said that explicitly taking on this debt, will reduce fiscal risk and enhance long term fiscal sustainability. However, it is consumers who bear the brunt of Eskom’s infrastructure woes, and the relentless increases in electricity tariffs, and government assistance to date has done nothing to ease this pain.

South Africans are still grappling with the National Energy Regulator of South Africa’s announcement of the massive 18.65% increase due to kick in in April this year. This, at a time when Stage Six load-shedding is being implemented across the country - plunging households and businesses into darkness and despair – with Eskom now in talks regarding possible Stage 8 blackouts.  

The repercussions of rolling blackouts pose a serious threat to the lives and livelihoods of people – not least of which pertain to food security - at a time when over 80% of families are battling to put enough food on the table, as a result of spiralling living costs. 

Roets says he is encouraged by government’s plan of action to reform the electricity sector, and by the President’s assurance during SONA 2023 that ‘National Treasury is considering the feasibility of urgent measures to mitigate the impact of load-shedding on food prices.’

Although the minister’s announcement of the refund on the Road Accident Fund levy for diesel used in the manufacturing process, will be extended to manufacturers of foodstuffs to ease the impact of the electricity crisis on food prices – it is not nearly enough. 

Roets concurs, saying that much more is needed to protect the country’s food security and to manage food prices. “It’s deeply concerning that government has not elevated this to the top of the country’s agenda,” he says.  Roets warns that the result of unmitigated power outages will be more food shortages and even higher prices. He says load-shedding undoubtedly contributes to rising inflation, by disrupting supply chains, increasing the cost of production and impacting manufacturing costs across industries and that this will be exacerbated by this latest hike in electricity costs. 

Roets questions why food prices have not come down in light of the substantial drop in the price of both petrol and diesel in January 2023.  In fact, food prices have not been adjusted downwards at all over the past year, despite petrol price cuts in September and October 2022. “I understand that farmers have to hike their prices in the current economic conditions, but the question remains why our big grocery retailers have relentlessly increased their prices, even though global food prices have dropped,” he asks. 

“It is unacceptable that the price of staple foods and drinks like potatoes, cooking oil, bread and eggs just keep on climbing, despite the relief at the pumps,” he points out.  This is substantiated by the latest Household Affordability Index by the Pietermaritzburg Economic Justice & Dignity group (PMBEJD) that shows that South Africans are paying more for these basic food items in 2023. 

Tax breaks and incentives 

Government incentives like the Twelve B Green Energy Fund, a soon-to-be-launched solar and renewable energy fund, offering investors a 100% tax break using Section 12B of the Income Tax Act, creates investment opportunities that can bolster the economy. President Ramaphosa pointed to tax incentives for the government’s plans to push rooftop solar across the country in his recent SONA.

Roets says he is encouraged by the minister’s proposed plans, which will attract more investment opportunities to the country. 

“The announcement of a tax rebate of 25 per cent of the cost of rooftop solar panels for individuals, to encourage people to install renewables, shows that Government is taking action, but I would like to see much more focus on other incentives for consumers,” he says.  “We need more initiatives that will offer relief to over-burdened citizens – like the City of Cape Town’s initiative that offers residents and businesses cash to sell their excess power into Cape Town’s grid.” 

Sin taxes add to consumer pain

The announcement that the health promotion levy will remain stable is good news for the struggling sugar industry,  which has lost approximately R1,2 billion per season since 2018 and resulted in close to 10,000 job losses, mostly in rural areas, where poverty levels are the highest. 

The proposed increase in the excise duties on alcohol and tobacco of 4.9 per cent, in line with expected inflation, was widely expected, though still a bitter pill to swallow.  

“While I understand that government needs to bolster the coffers, in light of the financial doom and gloom that the average South African has to contend with, placing the few affordable pleasures beyond the reach of consumers at this time simply adds to the pain,” Roets  

Greylisting still a threat 

The FATF Plenary will make its decision later this week on whether or not to put South Africa under increased monitoring, otherwise known as grey listing. If they do, South Africa could be shut out of certain financial markets, which would negatively affect the wider economy and particularly consumer prices.  According to the minister, two laws have been enacted to bolster the government’s broader fight against corruption, crime, state capture and the deliberate weakening of the institutions of law and order.  Whether this move will be effective in avoiding the greylisting remains to be seen. 

South Africans will no doubt breath a collective sigh of relief that there will be no tax increases for individuals this coming fiscal.  “This is really the only encouraging announcement for consumers in this year’s budget speech. Notwithstanding, government must act now to protect consumers’ pockets and jobs – before it is too late,” concludes Roets. 

The Minister closed off his speech by tipping his hat to the thousands of public servants who work behind the scenes to keep our country going.