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South Africa’s Budget Speech: A Bitter Pill to Swallow

A huge cut in the public-sector wage bill, setting the ANC government up for a mighty fight with its union allies, is the standout item in finance minister Tito Mboweni’s budget. Ratings agencies might be less impressed with the budget deficit and deficit numbers. In what it described as “a major step towards fiscal sustainability”, the government proposed cutting expenditure over the next three years by R156.1bn compared with its 2019 projections. With interest payments consuming 15c of every rand the government raises through tax, and set to be above what is spent on health by 2023, the Budget Review called for drastic action to arrest the slide. A lack of tax increases, a recognition by the government that there is only so much it can squeeze from taxpayers amid a weak economy and dwindling corporate profitability, was another surprise, with some private-sector analysts having predicted a VAT increase to plug the government’s gaping fiscal gap. Not only did the government not increase taxes for SA’s struggling consumers and companies, individuals were handed unexpected relief through above-inflation adjustments to tax brackets.