By Jessie Taylor
South Africa’s economic recovery has been uneven, and risks remain high, said Finance Minister Enoch Godongwana during the 2022 Budget Speech. This requires a cautious approach in which growth and fiscal sustainability remain a focus.
The 2022 Budget aims to reduce the budget deficit and stabilise debt while increasing income and employment options for the most vulnerable.
However, these interventions cannot replace the structural changes our economy needs. Difficult and necessary trade-offs are required.
Economic growth was hampered by the global pandemic, slowing commodity prices, violent unrest in parts of the country, and load shedding.
“I would like to reiterate our commitment to the reconstruction and recovery of our economy, saving lives and restoring livelihoods, as well as securing the long-term prosperity of our nation,” said Minister Godongwana.
South Africa’s economic growth estimate is 4.8%, with a real GDP of 2.1% is projected for 2022. Growth is expected to average 1.8% over the next three years.
Government debt has reached R4.3-trillion and is projected to rise to R5.4-trillion over the medium term.
The following public spending has been allocated in the 2022 Budget:
- Over the medium term, R76-billion is allocated for job creation programmes. In this Budget, an additional R18.4-billion is made available for the Presidential Employment Initiative.
- Over the next three years, R3.33-trillion will be allocated to the social wage to support vulnerable and low-income households. This is approximately 60 % of non-interest spending.
- R44-billion is allocated for a 12-month extension of the R350 social relief of distress (SRD) grant.
- 6-billion will be added for provincial education departments to address the shortfalls in the compensation of teachers.
- 6-billion is allocated to provincial health departments to support their continued response to Covid-19 and to bridge shortfalls in essential goods and services. R3.3-billion is allocated to absorb medical interns and community service doctors.
- R308-billion has been directed towards bailing out failing state-owned companies
- 9-billion is added to the local government’s equitable share to give basic municipal services more support.
Tax relief measures
The Budget includes R5.2-billion in tax relief to help support the economic recovery, provide some respite from fuel tax increases, and boost incentives for youth employment.
For the business sector
- The employment tax incentive will be expanded through a 50% increase in the maximum monthly value to R1 500.
- The corporate income tax rate will be reduced from 28 % to 27% for companies with years of assessment ending on or after 31 March 2023.
- The carbon tax rate will increase from R134 to R144, effective from 1 January 2022.
- As required by legislation, the carbon fuel levy will increase by 1c to 9c per litre for petrol, and 10c per litre for diesel, from 6 April 2022.
- The personal income tax brackets and rebates will be adjusted by 4.5%, in line with inflation. The annual tax-free threshold for a person under the age of 65 will increase from R87 300 to R91 250.
- No increases will be made to the general fuel levy on petrol and diesel for 2022/23. This will provide tax relief of R3.5-billion to South Africans.
- There will also be no increase in the Road Accident Fund levy.
“Households and businesses are still under financial pressure and are coping with higher obligations, the effects of COVID-19 and increased fuel prices. Now is not the time to increase taxes and put the recovery at risk,” said Minister Godongwana.
Economic Reconstruction and Recovery
The implementation of several critical structural reforms contained in the ERRP is being accelerated, said Minister Godongwana.
This includes the infrastructure projects, with The National Treasury to implement the results of a recently completed review of the Public-Private Partnerships framework.
“As we upgrade roads, bridges, water and sewer, transport, school infrastructure and hospitals and clinics, the aim is to unlock higher levels of employment for those involved in the projects,” said Godongwana.
“A provisional allocation is set aside in this Budget for R17.5-billion over the MTEF for infrastructure catalytic projects. We look forward to engaging with specific proposals in this regard. Value for money and quality of delivery is the top priority in the development of the project pipeline.”