Finance Minister Tito Mboweni delivered his maiden Budget Speech 2019
Tito Mboweni's Budget Speech 2019
the Minister painted a bleak picture of a country struggling with rising
expenditure, failing state-owned enterprises (SOEs) and declining revenues, he
also outlined several processes that were underway to remedy the situation.
Last week Finance Minister Tito Mboweni delivered his maiden Budget Speech 2019, outlining the state of South Africa’s finances and where government will be spending its money in the year ahead. Although the Minister painted a bleak picture of a country struggling with rising expenditure, failing state-owned enterprises (SOEs) and declining revenues, he also outlined several processes that were underway to remedy the situation.
Economically, growth for South Africa in 2019 is forecast at 1.5% and is expected to reach 2.1% by 2021. The budget deficit widened because of Eskom’s burden of debt, with the shortfall in revenue reaching 4.5% of the gross domestic product (GDP).
Mboweni announced austerity measures in the form of a smaller government payroll, with early retirement being made available to some 30 000 government employees. This saving will be used to support Eskom to the tune of R23 billion a year over the next three years.
Although there will be no increase in personal taxes, no changes were announced to income tax brackets. By not adjusting the income tax brackets for inflation, government will raise R12.8 billion for the year.
Fuel levies will increase by 29 cents per litre for petrol and 30 cents for diesel, while increases to the entire range of sin taxes are expected to bring in an additional R1 billion in Treasury.
Mboweni announced that government would not take on Eskom debt, signalling a clear message to rating agencies that government had taken note of their concerns. This budget was evidently meant to appease Moody’s concerns, and it would seem that the Minister had succeeded in his goal.
Markets reacted positively to the budget announcements, and the rand closed below R14 to the USD after trading as high as R14.35 to the greenback at some stage during the speech.
The local equity market had an exceptional week and gained 2.50%. The resources sector jumped 3.18%, followed by the financial sector with 2.52%, which sector reacted to a positive budget and a weaker currency.
It is all systems go for the general elections in May and it is hoped that the political rhetoric expected ahead of the elections will not derail local markets.
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