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How the 2019 budget speech will affect you

Posted  February 21, 2019

On 20 February 2019, Minister of Finance Tito Mboweni presented his budget for the next financial year. In these tough economic times, this is an event that receives great attention, as South Africans wait for the news of how the budget will affect them in the year to come. 

The good news, says Christie Viljoen, manager and economist at PwC, is that there wasn’t more bad news. Minister Mboweni didn’t make too many changes that have a direct impact on the average South African, he was very honest about the challenges that South Africa is facing, and has put plans in place for dealing with them.
He highlighted the key elements of the Budget Speech that affect the man in the street:

Personal income taxThere were no changes to the personal income tax brackets, which simply means that if you earn the same amount as you did last year, you will be taxed no more in the coming year. But that’s not the whole picture.

“If you receive an inflation-based raise this year – around 5% – you could end up in a higher tax bracket. Because the tax brackets haven’t moved in line with inflation, this means that you will be taxed at a higher rate, reducing your take-home pay. You won’t earn less, but you might not earn as much more as you would have, and won’t beat inflation,” Christie says.

This may have a small impact on affected taxpayers, but overall, it allows the government to claw back R12.8 billion in taxes.

Sin taxesAccording to Christie, taxes on alcohol and cigarettes will be increased every year. “The argument is that if you don’t want to pay the increased tax, don’t drink or smoke.”

This is how much more South Africa’s cigarettes and alcohol will be taxed by in the 2019/20 tax year:

2019-budget-speech

FuelThe fuel levy went up by 29 cents per litre for petrol and 30 cents per litre for diesel.

Unfortunately, the fuel price increase is going to hit South Africans where it hurts. Christie points out that it is a moderate increase, but with the rand volatility and oil price uncertainty, any increase is an unpleasant one, and will have a knock-on effect on other products and services.

GrantsAnnual, inflation-based grants increases were also announced.

The Government has allocated R567 billion for social grant payments. In 2019, they will increase as follows:

  • R80 increase for old age, disability, war veterans and care dependency grants.
  • R40 increase for the foster care grant to R1 000 per month.
  • The child support grant will increase from R410 to R420 per month in April and to R430 per month in October.

A new “Help to Buy” subsidy to help first-time home buyers purchase a home was also announced. As a pilot, it gets R950 million over three years. The details are yet to be released.

EskomSouth Africans are angry, and rightly so, about the return of load shedding. Minister Mboweni was very candid about the problems at Eskom, as was President Cyril Ramaphosa at his State of the Nation Address earlier this month.

Minister Mboweni announced that Eskom will be given R23 billion a year to help with its restructuring. “This isn’t a bail-out, it’s not cash, and it’s not taking away debt. It’s money to fund a restructuring and they have to ultimately repay it,” says Christie.

Small business and job creationThe government has allocated R19.8 billion for industrial business incentives, of which R600 million has gone to clothing and textile competitiveness programmes. Minister Mboweni says that this will support 35 000 existing jobs and create around 25 000 new jobs over the next three years.

The Jobs Fund supports job creation and the allocation to this fund was increased to R1.1 billion.

R481.6 million has been allocated to the Small Enterprise Development Agency to expand its incubation programme.

“It’s always good news when government announces initiatives like these,” adds Christie. “However, there have been many such initiatives, funds and summits over the years, but we tend to get stuck on the implementation. I can only say that the believing will be in the seeing.”

The bottom lineAs Christie says, the best news is that there wasn’t more bad news. There isn’t much in the way of tax relief for South Africans, and most of the measures to turn the economy around are long-term plans. However, the good news is that the taxpayer’s money is in the good hands of Minister Mboweni, who is being realistic and honest about the challenges South Africa is facing.

In closing his budget presentation, he said: “This is a budget that plants a seed for renewal and growth. It is all of our duty to tend the seed and see that it grows strong, tall and fruitful.”

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