Our viewpoint | Mboweni’s prudent budget

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Finance Minister Tito Mboweni was at pains to demonstrate that the Budget was not an austerity one, preferring to call it a prudent one.

He also heavily emphasised that it was a budget of hope, one designed to start a fiscal process that will ensure that future generations are not bankrupted, and that they will instead have something in the kitty passed down to them.

That he was able to strike even the slightest note of optimism is due to the fact that the economic forecast is not nearly as grim as it looked late last year.

Most likely to share his mood are taxpayers, after the National Treasury reversed a decision to increase personal income taxes to raise an additional R40 billion. There will therefore be a further R13,4 billion in tax relief to households through raising personal income tax brackets and rebates by five percent.

ALSO READ | Is the public wage bill the war elephant that tramples Mboweni’s hopes?

The sting, however, lies in the fact that there will be a tax revenue shortfall R213 billion, the biggest on record, and enough to cast a pall on any economic reconstruction plans.

To make it up means cuts all round, even if Mboweni is refusing to call these austerity measures. The big target is to take out R142 billion from the public service wage bill over the medium term, which will produce a lot of noise but it is obvious to everyone that this is non-negotiable.

It is not surprising that another debt warning was sounded, as costs to service government debt soar to just under R1 trillion over the next three years, which puts in the shade everything bar social spending.

With combined debt rising to over R5 trillion in the financial year 2023/24, South Africa will be paying R269 billion in interest to bondholders and other lenders this financial year, and R338,6 billion in the 2023/24 financial year.

To make this up will require the economy to recover substantially, and even the projected 3,3% growth for 2021 will be hopelessly insufficient.

Mboweni is nevertheless placing his hopes on the fact that more spending capacity by taxpayers, a boost through infrastructure spend, and a tightening up on corruption will do the trick.

It will have to do.

Yves Vanderhaeghen.
Editor-in-chief Yves Vanderhaeghen.

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