The 2019 Budget in a nutshell


#1


Eskom (and other SOEs)

· Government not taking on Eskom’s debt

· Setting aside R23 billion a year to support Eskom during its “reconfiguration”

· Support conditional on appointment of a chief reorganisation officer (CRO)

· Finance minister Tito Mboweni likens reorganisation to “curatorship”

· Mboweni: The president is right when he says Eskom will not be privatised

· Contingency reserves revised upwards to R13 billion for 2019/20 to respond to possible requests for financial support

· Support budget-neutral “as far as possible”

· Cabinet considering proposal to end guarantees for operational purposes

· Mboweni: Summit must be held on where to go with state-owned enterprises (SOEs).

Growth and other key figures

· GDP growth for 2019 revised downwards from 1.7% to 1.5% (2020: 1.7%; 2021: 2.1%)

· Tax revenue for 2018/19 to undershoot mini-budget estimate by R15.4 billion, half of this due to higher than expected Vat refunds

· Consolidated budget deficit to widen to 4.2% in 2018/19 from mini-budget estimate of 4% (2019/20: -4.5%; 2020/21: -4%)

· Gross debt to GDP ratio to stabilise at 60.2% in 2023/24, higher than mini-budget projection of 59.6%

· In 2019/20 government will spend R243 billion more than it earns (revenue of R1.58 trillion and spending of R1.83 trillion)

· SA is borrowing R1.2 billion each weekday

· Interest expenditure is R1 billion per day.

Read: The bottom line and what we are going to do about it

Tax announcements

· No change to personal income tax rates or brackets but slight adjustment to rebates (revenue of R12.8 billion to be raised this way; collection by stealth)

· No inflationary adjustment to medical tax credit

· No changes to tax rates for corporate income tax or Vat

· Employment tax incentive of up to R1 000 can be claimed for employees earning up to R4 500 pm (previously R4 000)

· Sugar tax increase from 2.1 cents per gram to 2.21 cents per gram

· Carbon tax of 9c per litre on petrol and 10c per litre on diesel effective June 5

· General fuel levy increase by 15c per litre

· Road Accident Fund levy increase by 5c per litre

· Plans to tax electronic cigarettes and tobacco heating products

· Excise duty on cigarettes to rise by R1.14 to R16.66, and 12 cents to R1.74 per can of beer

· New Sars commissioner to be appointed “in the coming weeks”

· Judge Dennis Davis to assess tax gap (difference between tax due and tax collected)

· Review of explosion of duty-free shops in SA planned

· Introduction of export tax on scrap metal to be explored.

Expenditure

· Baseline expenditure adjusted downwards by R50.3 billion since mini-budget

· Half of the reduction comes from adjustments to spending on compensation

· Older public servants may retire early and gracefully, leading to savings of R4.8 billion in 2019/20; R7.5 billion in 2020/21 and R8 billion in 2021/22

· Limits on overtime, bonus payments and pay progression planned

· Staffing of diplomatic missions considered “unjustified”, to be reviewed

· No salary increases for members of parliament and provincial legislatures or executives at public entities

· Provisional allocations for financial support to Eskom and Infrastructure Fund offsets baseline reduction

· Expenditure ceiling revised upwards by R16 billion over three years

· Allocation to Jobs Fund to rise to R1.1 billion over three years

· Old age grant rises R80, foster care up R40 to R1 000, and child support grant to R420 in April and R430 in October

· Help-to-buy subsidy to help first-time home buyers purchase a home; R950 million for pilot phase over three years.

Read: #Budget2019: This is what you’ll pay

Infrastructure Fund

· Central pillar of budget and reprioritisation

· Will accelerate R526 billion of on-budget projects by bringing in the private sector and development finance institutions

· In several cases, the private sector will design, build and operate key infrastructure assets

· Government to commit R100 billion over next decade.

Read: Tito Mboweni’s complete budget speech


#2

I have mixed feelings about the announcements. On the one hand, it paints a picture of how dire the situation currently is, but on the other hand there are some positive steps forward to try and dig us out if the hole.