Budget 2018: A speech to remember … for all the wrong reasons

Brunilde Fioravanti
Febbraio 23, 2018

The rand strengthened 1.1% in afternoon trade on Wednesday, after finance minister Malusi Gigaba delivered a budget speech that steered clear of any shocks or nasty surprises, falling in line with what many analysts were expecting.

It is nonsense, as some economists have suggested, that zero-rating and the like protects poor people from the effect of Value-Added Tax increases.

Matikinca said the reforms announced by Gigaba should be enough to delay a Moody's downgrade for now, but that action on structural reform was needed before mid-year reviews to stave off a downgrade completely.

Equal Education said instead of VAT being increased, Gigaba should have opted to increase corporate income tax which "would result in a revenue of billions of rands, and would not put strain on poor and working class families in the way that an increase in VAT will".

It is a risky decision by the ANC, which has already seen the support of its...

Gigaba's first budget was an uphill climb, partly because he was the bearer of bad news and mostly because he was not the person who could rally South Africans to give the government more of their money.

It is hoped that the increase, coupled with adjustments to income tax brackets, will raise some 36 billion rand ($3 billion) for the public purse in 2018-19.

The South African government, now under Cyril Ramaphosa who was sworn in last week, has pledged improved its efforts to plug a revenue hole in its budget and fix its economy after nine years under Jacob Zuma, who resigned as president earlier this months amid pressure from the ruling African National Congress.

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Many expected a VAT hike as well as tougher taxes on the country's wealthy.

The change in the debt forecast could help persuade Moody's Investors Service-the only ratings firm that still deems South Africa's bonds as investment grade-to forgo a possible downgrade in March.

The price of fuel will also increase by 52c/litre and social grants received a 7% average increase.

The budget also included spending on education, rising to 13.7% annually - the fastest growing spending category.

That is barely in line with population growth and far short of the 3% expansion for 2018 Mr. Ramaphosa had envisaged when he campaigned to become ANC leader a year ago, and of the 5% growth he had foreseen for the period after 2023.

READ: Fact-Check: The Poor Won't Pay The Most For The VAT Increase.

This includes an increase in the cost of the executive.

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