By Ina Opperman
Economists were mostly happy with the 2023 Budget, but are worried about grey listing and the public sector wage bill.
Minister of Finance Enoch Godongwana delivered a solid and balanced budget on Wednesday and
economists believe that the markets will react positively to the fiscal discipline it contained. It was
as good as we could have hoped for, given the current economic conditions.
Independent economist prof. Bonke Dumisa says he was impressed with the budget, but he did
notice that the minister spent very little time on Eskom. He thinks the 125% tax rebate for
businesses to install solar panels is a step in the right direction, although the 25% rebate for
consumers is neither here nor there.
“He tried his best within his means with the increases in social grants and I appreciate that he gave
the NPA an additional R1.5 billion to stop corruption. I wish there was more to give because more
convictions will make it easier to get the money back from the proceeds of crime. An increase in
fuel levies is also welcome, but the volatility of international crude oil prices will still leave us
exposed.”
Prof. Jannie Rossouw, visiting professor at the Wits Business School, says the minister said what
he expected. He says government is giving tax rebates to consumers and businesses to generate
electricity to ensure that load shedding is less of an issue by the election next year.
“However, I am worried about the public sector wage bill as we do not know what will happen if
government’s wage offer is rejected. What I did like was that more will be done to stop tobacco
smuggling, because this is costing us a lot of revenue.”
Map to fiscal sustainability
Arthur Kamp, chief economist at Sanlam Investments, says National Treasury has lifted the
expected government debt trajectory, but importantly continues to map a path to fiscal
sustainability and a lower government debt ratio in the long-term.
“However, fiscal policy is not benign with respect to its impact on the economy. Our sovereign
debt rating remains sub-investment grade. Accordingly, real interest rates are high and
government continues to absorb a large share of available resources. In the absence of firm
foreign capital inflows, this constrains private sector investment and job creation.”
Frank Blackmore, lead economist at KPMG, was impressed by the infrastructure spending
Godongwana announced, as well as no major tax proposals based on a higher-than-expected
revenue collection which was even higher than the medium-term budget policy statement from
last October.
“It is also good that Treasury sounds committed to limit the size of the public sector wage bill and
increases. It is also a good signal to the international credit agencies and signals the fiscal
constraint we have been talking about over the past few years.”
Tertia Jacobs, treasury economist at Investec, says the improvement in Eskom’s cash flow,
allowing it to burn more diesel and confidently embark on its maintenance and fixed investment
programme, reduces some of the downside risks to GDP growth.
Johann van Tonder, economist for group strategy at Momentum Metropolitan, says for him, the
good news was that government is back to being a going concern with revenue exceeding noninterest expenditure.
“This enabled government to provide personal income tax relief to consumers, as well as
incentives for consumers to buy solar panels, putting almost R20 billion back into consumers’
pockets. The minister also dealt very well with the Eskom situation.”
Hannes van den Berg, CEO at Consult by Momentum, says he is concerned about the country’s
imminent grey listing.
“The minister’s closing comments implied that this would soon be a reality, which will make
offshore investment far more challenging and place a massive administrative burden on the
financial services sector.”
Hope for SMEs but no support
Neil Roets, CEO of Debt Rescue, says the minister offered hope to the business sector, but he
found it disappointing that there was no emphasis 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.”
Business Leadership SA said it expected the country’s fiscal trajectory to weaken given the Eskom
debt transfer and while the high debt level is a concern, this was necessary to help address the
crippling effects of loadshedding.
“Addressing the energy crisis was always going to be central to this budget and Eskom’s debt relief
of R254 billion was larger than expected, an acknowledgement of how critical it is to free up
financing for Eskom to be able to operate more efficiently.”
Dr Elna Moolman, head of macroeconomic, fixed income and currency research at Standard Bank
expects the financial market reaction to likely be neutral. “Investors will draw some comfort from
the continuity of the general fiscal intent and more clarity about the fiscal impact of support for
Eskom.”
However, she says, fiscal risks persist and investors will naturally still be concerned about the
downside risks to the economic growth trajectory amidst the surge in load shedding and a less
supportive global economic backdrop, as well as upside risk to spending on social grants, wages
and SOE support.
A distinctly human budget
Angelika Goliger, chief economist at EY Africa, says it was a distinctly human budget, with a
significant amount of sympathy and some relief considering the current hardships of the high cost
of living, higher borrowing costs and constant load shedding with no new tax increases and relief
for households and businesses across the board.
“This budget also signals that the support South Africa received from the global economic
environment over the past two years is coming to an end. The global economic environment is
highly uncertain and volatile, with the extent of the moderation in global economic growth a
much-debated topic.”
Jeff Miller, founder of the Twelve B Green Energy Fund, says the minister must be congratulated
on his foresight to increase the Section 12B tax allowance from 100% to 125% for businesses that
install solar.
“This move will give our investors an increased return from 14% to 18%, which is an unbelievable
return for a moderate risk investment. These incentives bode well for South Africa, for the Twelve
B Green Energy Fund and the acquisition of renewable energy.”
Garth Rossiter, chief risk officer at Lulalend, says the state promises to be as frugal with its
national budget as we, the South African people have become with our household budgets.
“SMEs and entrepreneurs will be happy to see no major tax increases. However, the limited tax
revenue increases appear to be a result of an efficient Sars operation, rather than economic
growth.”
He also noticed that Godongwana’s speech indicated an intention to review and possibly even
reduce the 18.65% Eskom tariff increase set for implementation on 1 April.
“This year’s budget speech captured the stark reality of South Africa’s current economic situation.
Yet, despite the challenges facing the country, there are reasons for hope, including the emphasis
on sustainable energy.”
Dr Andrew Golding, CE of the Pam Golding Property Group, found it welcome news that the
brackets of the transfer duty table will be increased by 10 per cent, allowing properties below
R1.1 million to avoid any transfer duty payments.
Support for food production is good news
Roelie van Reenen, supply chain executive at Beefmaster Group, says he was pleased to hear that
the budget recognises the burden on South African consumers due to the electricity crisis, which
has highlighted the cost of food production.
“Government acknowledges that food manufacturers may have no other option but to pass on the
increased cost of production to an already struggling consumer, which they are trying to address
through targeted measures. We are particularly pleased that government plans to ease the impact
of the electricity crisis on food prices by extending the refund on the Road Accident Fund levy to
food manufacturers.”
Kulani Siweya, chief economist at Agri SA, says while government could have gone further in
addressing the challenges facing the agricultural sector, the budget reflected a sober analysis of
the economic environment and an understanding of the particular difficulties faced by the sector
with significant implications for food security.
“Agri SA also acknowledges the measures put in place to assist the agricultural sector while
government works to put Eskom on a firmer footing. Of particular note is the extension of the
rebate of the Road Accident Fund levy for diesel used by manufacturers of foodstuff. This
intervention will help to contain the cost of food production to the benefit of consumers.”
