South Africa’s 2019 Budget: Tough decisions made, but will it be enough?
South African Budget 2019 was delivered today by Finance Minister Tito Mboweni, his maiden Budget Speech following the delivery of the Mid Term Budget Policy Statement (MTBPS) in October 2018, a mere two weeks after taking over as the new Minister of Finance. The Minister had indicated that South Africa was at a crossroads, with the MTBPS highlighting the difficult economic and fiscal choices confronting the country. On the economic side, the MTBPS had focused on President Ramaphosa’s economic revival plan, especially his economic stimulus package tabled in September 2018 (see Sept. 21st, 2018 Report). Emphasis was also placed on the restoration of good governance and fighting corruption, as well as reforming state owned entities (SOEs).
The National Treasury’s economic outlook for 2018 as captured by its GDP forecast has remained the same as that forecasted in the MTBPS, i.e. 0.7% (actual GDP figures are to be released in early-March), with the projections for 2019 at 1.5%. Due largely to this muted economic growth that has remained below 2% since 2014, revenue collection has consistently fallen short of budget. Tax revenue for the current 2018/19 financial year has been revised down by R15.4bn from October 2018’s MTBPS, which in turn had been revised down by R27.4bn from Budget 2018. The Minister attributed around half of the rise in the revenue shortfall since MTBPS 2018 to higher than expected VAT refunds (VAT was also increased from 14% to 15% during Budget 2018). Additionally, issues with tax administration brought upon by the maladministration and serious loss of technical capacity at the South African Revenue Services (SARS) are responsible for part of the poor revenue performance. However, Minister Mboweni has once again reminded the country that “SARS is being fixed” with the assistance of counsel from the (Judge) Nugent Commission.
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