This year’s annual budget is likely one of the most uneventful budgets in South African history, according to Dawie Roodt, chief economist of the Efficient Group, who said that it was primarily the things that were not addressed in this year’s budget that are more important.
However, there are a number of key areas that South Africans should be looking at, he said.
While the budget mainly went as expected, Roodt said that he was surprised about the ‘relatively small amount of money’ that was transferred to Eskom.
Roodt noted that this number was nowhere near sufficient to keep the lights on at Eskom.
“I have a suspicion that there could be more behind this, however, we will probably have to wait until after the elections to get the actual story,” he said.
In his budget speech, Mboweni announced that Eskom would receive the biggest bailout in the nation’s history after the government stepped in to prevent its collapse.
Eskom will get a R69 billion cash injection over the next three years to help service its debt and free up cash for operations.
Part of the utility’s transmission business will also be sold to private investors and it will have to drastically reduce costs.
“Pouring money directly into Eskom in its current form is like pouring water into a sieve,” Mboweni said.
“We are setting aside R23 billion a year to financially support Eskom during its reconfiguration.”
Taxes and growth
Looking at the specifics of the budget, Roodt noted that very few adjustments had been made to South Africa’s taxes.
“The normal taxes like sin taxes and the fuel levy were increased, but personal income tax brackets were not adjusted sufficiently to address the effect of inflation.
“What this comes down to is that personal income tax has increased and that means the minister of finance has become more dependent for his revenue from a relatively small number of individuals,” he said.
Commenting on the country’s growth statistics, Roodt said that Mboweni was far too optimistic.
“The state’s finances are probably much worse – or are going to deteriorate – much more than the minister of finance is expecting at this stage,”he said.
“That probably means that we can expect another downgrade.”