Budget Speech 2019: See the impacts on South Africa
Finance Minister Tito Mboweni has delivered the 2019 Budget Speech for South Africa. The primary area of contention, Eskom, has been provisioned bailout funds.
Eskom to receive bailout funds
South Africa’s embattled power utility Eskom will see rescue funds arriving from the fiscus in an amount of R69bn over the next 3 years (R23bn per annum). The funds are said to provide financial support to Eskom over the company unbundling period. In the State of the Nation address, the president announced that Eskom would be divided into three entities responsible for electricity generation, transmission and distribution. The move is an attempt to create more transparency with Eskom’s cost and debt. Eskom debt currently sits at around R420bn and the cash injection will help the utility improve operational cash flow as well as service its debt obligations.
National Budget 2019 Summary
The Macro Outlook
- Real GDP growth estimated at 1.5% in 2019, 1.7% in 2020 and 2.1% in 2021
- CPI Inflation estimated at 5.2% in 2019, 5.4% in 2020 and 5.4% in 2021
- Current Account balance (%of GDP) estimated at -3.4% in 2019, -3.8% in 2020 and -4% in 2021
The Budget Framework
- Gross debt is expected to stabilize at 60.2% of GDP in 2023/2024
- Consolidated budget deficit is expected to narrow from 4.5% of GDP in 2019/20 to 4% in 2021/22
- R75.3 billion are budgeted over the 2019 medium-term expenditure framework (MTEF) period, mainly for Eskom’s reconfiguration plan
- Over the medium term, spending reductions amount to R50.3 billion, 54 per cent of which comes from compensation budget adjustments
- Since the MTBS 2018, the contingency reserve has been increased by R6 billion in 2019/20 to respond to requests for fiscal support from smaller state-owned companies
- Additional support will be financed by selling non-core assets
- Total public spending over the Medium-Term Expenditure Framework (MTEF) period is expected to be R5.9 trillion.
- The bulk of spending is allocated to learning and culture, social development, health and community development.
- The expenditure ceiling is increased by R16 billion over the next three years, mainly due to provisional allocations for reconfiguring Eskom, which amount to R69 billion
- Compensation of employees remains the largest category of spending, accounting for an average of 34.4 per cent of consolidated expenditure over the MTEF period
- Measures are introduced to realise a R27 billion reduction in compensation
- Funds amounting to R33.4 billion have been reprioritised over the MTEF period, mainly for service delivery and infrastructure.
Tax Changes (in Brief)
- Marginal amendments to personal tax rebates to raise R12.8bn
- Sugar Tax increase +5.2%
- Carbon Tax 9c per litre of petrol and 15c per litre on diesel commencing 1 June 2019
- General fuel levy +15c per litre
- Road accident fund levy +5c per litre
- Excise duty on cigarettes 1.14c per box
- Excise duty on beer 12c per can of beer
- Research into export tax on scrap metal being introduced
- Research into taxing electronic cigarettes
Related artile: Budget Speech 2019 - What Should We Expect and Rand Report
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