What does the National Budget Speech mean for you? 

How does the Budget affect my income?
  • There have been no significant tax changes
  • Government has proposed no changes to personal income tax thereby generating R15 billion to alleviate fiscal pressures; as a result, no inflation adjustments to be made to personal tax brackets and medical aid credits
  • This will mean no changes to your net income, however, no inflationary benefit
  • Saving for emergencies and efficient budgeting will remain important for South Africans
How does the Budget affect my everyday spending?
  • VAT remains unchanged at 15%
  • No increase in the general fuel levy
  • Alcohol increases between 6.7% and 7.2% and cigarette tobacco increases by 4.7%
  • Interest rates remain high at 11.75%, however rate cuts are a possibility later in the year. Which would result in a decrease in house and car payments
The impact of the Budget on the Economy:
  • Government debt will peak at 75.3% of GDP in 2025/2026
    • High government debt levels have contributed to reduced fiscal flexibility, Rand weakness, credit downgrades. All resulting in a decrease in investor confidence within South Africa
  • Inflation 5.3% in January 2024
    • Through effective monetary policy, inflation is starting to stabilise. However, South Africa is not over the hurdle just yet.
  • SOE expenditure: R47 billion to Transnet
    • This is to support the struggling entities’ debt obligations and recovery plan.
    • Increase in SOE expenditure is contributing to high government debt levels. SOE’s continue to be one of the biggest expenses for government resulting in debt accumulation and budgetary pressures
  • GDP growth at 0.6% in 2023, down from 0.8% in 2023 medium term budget policy statement
    • The decrease in economic growth can largely be attributed to load shedding.
  • Prime lending rate 11.75%
    • Higher interest rates have resulted in decreased consumer spending. With inflation starting to stabilise, rate cuts are a possibility but nothing has been finalised.
  • Healthcare allocated: R848 billion
  • Education allocated: R25,7 billion

The energy crisis in South Africa
  • The Eskom debt relief program has allowed Eskom to focus on its core business
  • Load shedding is still one of the biggest detractors of economic growth
  • To promote further investments in renewable energy, the minister proposed an increase in the limit for renewable energy projects that can qualify for the carbon offsets regime, from 15 megawatts to 30 megawatts
  • Government intends to tackle load shedding through the combination of private investment in new energy projects, rooftop solar installations and improvements in Eskom’s generation fleet
  • Introduction of a new R2 billion conditional grant over the medium term to fund the rollout of smart prepaid meters

How does the Budget affect my investments?
  • Capital Gains Tax (CGT) to stay the same
  • Dividends tax to stay the same
  • A higher interest rate environment has been negative for equity stocks, but positive for cash instruments. Investors must consider what a reduction in interest rates in future will mean for their portfolios
  • The pause in rate hikes and the possibility of rate cuts have led to positive investor sentiment within the equity market
  • The JSE remains one of the most undervalued stock markets in the world due to South Africa’s economic environment
  • JSE underperformed Global markets, offshore diversification must be considered.
  • Volatility remains high and staying the course still the advised and trusted investment strategy