Finance Minister Enoch Godongwana's maiden Budget speech, delivered this week, has been well received by most of the business community and experts hosted by law firm Webber Wentzel believe it is a step towards a private sector-friendly economy.

In a February 25 webinar unpacking the annual Budget speech, Webber Wentzel partner and insolvency expert Julian Jones described the Budget as being “well balanced”, but in need of continued implementation and more policy improvements.  

Sanari Capital founder and CEO Samantha Pokroy welcomed the bounce-back facility for small and medium-sized enterprises announced by the Minister, but said there could have been more incentives to assist small businesses.

Nedbank business strategist Brad Webber deemed it encouraging that the corporate tax rate had been lowered and that the National Treasury had provided strong messages about creating an environment for corporates to operate better.

He did not, however, believe the Budget said enough to spark merger and acquisition activity over at least the next 18 months in South Africa. “While this Budget may stimulate some level of confidence, we have some way to go. Gross domestic product growth rates are better than years gone by, but it is still from a very low base.

“It will take time to get back to a level, such as in 2005, when multinationals were flooding to South Africa to buy into its growth,” he stated.

He mentioned that South Africa was losing 14 listed companies, on average, every year, which he said would continue for a while.

Webber Wentzel director and tax adviser Brian Dennehy remarked that, even if the Budget instils some level of confidence, it is often eroded by other pieces of regulatory and economic policy, for example the Black Economic Empowerment Commission, which he said often had questionable judgments and a knack for creating confusion in the market.

He also believed government was not doing enough to correctly shape trade policy for increased competition. He referred to how Mauritius facilitates a lot of trade into the African continent, whereas it could be South Africa serving as the gateway into Africa for trade.

Dennehy was positive about there being improvement in governance at the South African Revenue Service, evidenced in part by higher tax collection rates communicated in the Budget.

Econometrix director and chief economist Dr Azar Jammine echoed this sentiment, saying the revenue service was clamping down on tax evasion and collecting more tax from “other” sources such as illicit traders.

From an economic standpoint, Jammine commented that the main feature of the Budget was how government surprisingly exceeded its originally expected revenue collections.

This was, however, largely owing to a rise in many commodity prices and resultant higher corporate taxes, which was unlikely to continue for too long.

Jammine deemed it positive that government would use the bulk of its extra revenue to retire debt, hindering what could have been a rise to R5.3-trillion in two years’ time.

He noted that the South African government had been on a mission to narrow the budget deficit, particularly through garnering more private sector investment, but could only do so much with continuous downgrades in credit ratings – which present a higher risk for investors.

Jammine said that, with government reducing the corporate tax rate by 1% and foregoing a fuel levy increase for the time being, it sent an important message that government did not want to increase the tax burden on South Africans and preferred to rather provide social protection.

Moreover, he commented that political leaders remained divided between those supporting private sector as economic drivers of employment versus those convinced of the ideology that government must rule the roost. He hoped to see the former increasing as coalition governments become more prevalent in coming years, since this approach ushers in more investment.

He cited a significant possible issue in future being the National Treasury potentially adopting proposals for even more social grants. “The propositions under consideration could lead to government spending as much as 35% of its total Budget on social wages, while R248-billion is being spent on social grants every year already.”

Jammine pointed out that there were seven-million taxpayers out of a 60-million population. “Effectively, between 5% and 6% of the South African population is paying about 92% of all personal tax in the country and funds government’s social expenditure. We cannot continue along these lines.”

Nonetheless, he said Treasury was coming to terms with it needing to improve its structures and act more effectively, realising the structural reforms necessary to limit more debt and enable economic growth.