Finance minister, Tito Mbwoeni, is set to deliver his annual budget speech on the 20th of February.
While all of the announcements will impact your pocket and lifestyle in some way, debt issues will likely be at the top of the agenda.
This is according to Craig Pheiffer, chief investment strategist at Absa Stockbrokers & Portfolio Management, who said that the budget has deteriorated substantially over the last few years.
“The one key thing we’re hoping Tito Mboweni will deliver is a budget that prioritises getting back onto the path of fiscal consolidation,” he said.
“Despite hopes that the third year of each budget framework will be the year debt peaks, unfortunately, South Africa’s debt has been ratcheting up.
“This is in part because every time we face the Medium-Term Budget, the deadline for this long-promised ‘peak’ is pushed out.”
Pheiffer said that currently, South Africa is at just under 60% of debt to Gross Domestic Product (GDP).
As this figure continues to grow it will continue to eat into other costs – which means that the government has to spend less in other places if they want to resolve this issue.
What to expect?
Alongside other announcements, Pheiffer said that there are five things to look out for in the 2019 budget.
- The budget deficit announcement. This is the most important figure to citizens and market-watchers alike. “In 2018 we had a budget deficit of 4.3%, which widened from 3.1% in 2017. This widening is responsible for the unfortunate downgrades we received, and this year’s figure will set the tone for the whole of the 2019 budget,” said Pheiffer.
- Tax brackets. “Tax brackets were adjusted very moderately up last time but just below inflation, leading to a bracket creep,” said Pheiffer. A bracket creep comes about when consumers receive an inflationary increase but are pushed into a new tax bracket, leading to the unlucky few earning less. “If you’re on the cusp of the bracket or they increase the bracket to just above what you’re earning, you may lose out by earning less or paying more taxes,” he said.
- Economic stimulus and recovery initiatives. “Most people are going to want to know how Mboweni plans to spend the money efficiently – effectively getting more bang for our buck as he gets the economy going, with a special focus on stimulating growth and private investment,” said Pheiffer.
- Way forward with state-owned companies. It’s no secret that many of South Africa’s state-owned companies are in need of assistance. “Knowing that these state-owned companies are in dire straits, many of us are going to want to know how they will be helped despite the constraints of the budget,” said Pheiffer.
- The public sector and the Wage Bill. These make up the biggest expenditure of the budget. “Mboweni will have to tread very lightly because citizens will not react well to more job cuts, and with an upcoming election it would be politically unpalatable,” said Pheiffer.