CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading CFDs with this provider.You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

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

Spending Programmes

  • 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

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Monday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.