A ‘budget for the rich’, according to the Good Party, Finance Minister Enoch Godongwana’s Budget 2023 showed how the South African economy is severely hobbled by the very services that are meant to support its progress. In this regard, Eskom feels like Public Enemy #1, with Transnet coming in at #2.
South Africans have been wanting to know for years exactly how much of Eskom’s debt the state was going to take on, and how they planned to deal with that debt. We now have clarity: they (we/taxpayers) are going to take on R254bn. It is more than a little disappointing that government will need to take on extra debt to finance this.
As it is, the Budget showed that the cost of paying off debt has ballooned to more than R360 billion a year, with the share of government revenue now spent on debt repayments approaching 20%. This is also the Budget’s fastest-growing spending item, climbing by almost 9% a year. Sigh.
The good news was that there were no tax increases and even some tax relief. Income tax scales were adjusted for inflation, changes made to the tax tables for retirement and, notably (for the wealthier classes), private energy generation is incentivized for individuals and businesses.
Energy-related tax relief for business is a big win. Businesses that spend money on becoming energy-independent can claim up to 125% of those expenses against their taxable income.
This is fantastic news and tackles a burning inequality that has become obvious over the last 24 months. Big businesses, such as mining houses and real estate companies, have been installing solar and generators and so on. Those with the means have continued trading, it has been business as usual during loadshedding, while small and medium-sized businesses that don’t have the cashflow and the capital to invest in energy independence have been left behind.
This tax relief for all businesses is a super critical step that goes some way to ensuring we don’t add energy inequality to our existing wealth and income inequality.
A potential tax rebate of up to R15,000 for individuals who install solar panels on their homes (ie add new capacity) after March 1 is welcome news for those who can afford the R150k-plus investment that requires.
On the other hand, the lack of an increase to the social distress grant is a blow to people who can barely afford candles and matches. Still billed as a temporary measure this life-saving grant, a de facto Basic Income Grant, is still fixed at R350 a month, where it has been for three years.
Bullet dodged … again
The commodities boom (and related boost to the tax coffers) means another deferment on falling off the fiscal cliff. Tax income of almost R94 billion above expectations means a budget surplus for the first time in more than a decade.
However, let’s be realistic, the combination of softening commodity prices and mining exports being hindered by the disaster that is South Africa’s railways and ports mean this bullet cannot continue to be dodged for long.
Once we fall over the fiscal cliff it will be extremely difficult to get back up.
All in all, a sneaky little leg-up for the wealthier while the very poor still have the boot on the neck.