Reinforcing the Reserve Bank’s independence, while not allocating extra to Land Reform and National Health Insurance…

…just a few of the take-outs from Minister Tito Mboweni’s budget that was tabled in Parliament yesterday.

In what was broadly regarded as a “Surprise Budget”, after pundits expected it to be a “Do or Die/Austerity Budget”, Minister Mboweni presented a balancing act that few expected he could!

By shifting the pain of paying for maladministration and policy confusion away from the long-suffering, and already-overtaxed South African people, and referred much of this over to the Public Sector, Minister Mboweni effectively cracked his knuckles and showed that this administration is the new Sherriff in town. This important dynamic certainly pleased the market, with bond yields and ZAR both strengthening nicely, but it certainly brings political consequences that remain to be seen…

Resoundingly positive, though, are the additional allocations made to increase the funding and budgets of the National Prosecuting Authority (NPA), Special Investigations Unit (SIU), and the Criminal Justice System – in his last budget, Minister Mboweni increased funding by some R1bn to these departments. The increase of a further R2.4bn in funding this year, aims the sights of the Justice System squarely at the corrupt politicos who still (somehow) occupy the very seats in government that enabled them to misappropriate the immeasurable sums of money that they did… Hope springs!

Unfortunately the expectation that our State Owned Entities (SOEs) will soon be financially independent and not reliant on taxpayer-funded bailouts remains elusive. With Eskom’s newly-appointed CEO, Andre de Ruyter, at the helm and bringing a more pragmatic approach to managing load-shedding while maintaining and repairing Eskom’s aging & ailing fleet of power stations, and SAA in a massive cost-cutting drive under business rescue, the anticipation for fewer bailouts in the future may potentially become a reality yet!

1. Above-inflation increases to tax-brackets and rebates

a. Every individual taxpayer, as well as trusts, enjoy marginal tax-relief across all brackets, and an increase in tax thresholds, rebates, and even medical aid tax credits

2. Tax-Free Savings Account annual caps increase from R33,000 to R36,000
3. Company Tax rates, Interest exemptions, Capital Gains exclusions, Dividends Tax, Retirement Lump Sums and VAT all remain unchanged into the coming tax year
4. Removing the need for South Africans to financially emigrate – South Africans will be able to still live overseas and keep bank accounts, property and ties to country

All in all, the challenges faced by Minister Mboweni are as unenviable as anyone can imagine. Yet he certainly presented the Finance Ministry’s intentions to steer the ship, RMS South Africa, onto a path of fiscal consolidation and higher growth. What has been missing until now is confidence – this Budget will likely do its bit, along with the prospect of lower interest rates later this year. A few Guptas and State Capture perpetrators in orange-onesies is the next key step, and that what is really missing before we crack open that bottle of 25-year Old Single Malt… (which, ironically, will cost you an extra R2,89 in sin taxes!)