A real quickie this blog joining the chorus of feedback and comment on the budget.

NFB Private Wealth Management was succinct in its bulletin of 20 February 2019, commenting:

In less than 60 minutes Minister Mboweni presented his maiden budget in Parliament today. In a national election year, off the back of poor economic growth and dwindling confidence, it had to be a budget targeting renewed optimism for us at home and the broader investment community. As he started talking, the rand weakened but by the end of the day, had strengthened against all major currencies; perhaps a glimmer of hope? – Minister Mboweni

Little changed as regards personal taxes but inflation will mean that the man-in-the-street pays more. From the little bit I’ve experienced recently, Mark Kingon, acting SARS Commissioner, has SARS on its toes looking for unpaid tax. Beware! Fortunately, there were “no changes to retirement funds, trust tax rates, donations tax and estate duty” and CGT. That’s good news. At the corporate level, company tax remains at 28%, says the NFB report. Sin taxes have increased. E-cigarettes have not escaped the attention of the new Finance Minister and one of our colleagues is really irked about that ☹

My most annoying one is fuel levy [29 and 31c on petrol and diesel respectively]. If we understood what it means to use a taxi every day we would realise the 41% we pay in taxes in the price of every litre of fuel, is simply a tax on the poor subsidized, in the total, by the rich. We’re not exceptional but when added to the impending Eskom tariff increase, prepare yourself for a shock to your pocket. We’re staring down the barrel of higher inflation, controlled by increasing interest rates, in a tiny-growth economy, while fighting for job creation.

The introduction of a Chief Reconfiguration Officer [CRO] to oversee SOEs who rely on the government for funding should curb ever-increasing debt. Love it, Minister Mboweni! Government’s wage bill being cut “by R27-billion over the next three years” and a “freeze on performance bonuses and salary increases for certain state employees” is welcomed. The Minister concluded, “There are no quick fixes, but our nation is ready for renewal.”

Sin Tax 2019

Very short and sweet.

The Businesstech report was more detailed but I just draw out of it certain relevant points:

  • The minister painted a bleak picture as the country struggles with rising expenditure, failing SOE’s and declining revenues, but outlined several processes underway to try and rein things in.
  • Economically, real GDP growth for South Africa in 2019 is forecast at 1.5% and is expected to reach 2.1% by 2021.
  • In the medium term, spending reductions are expected at R50.3 billion, while provisional allocations of R75.3 billion have been budgeted, mainly to deal with the Eskom crisis.
  • The country’s budget deficit has widened because of Eskom and because of a revenue shortfall and is now seen at 4.5% of GDP in 2019-20 – up from the 4.2% forecast in the October mid-term statement. [Ed: We have reached the critical 60% Debt-to-GDP level, often referred to a fiscal cliff.]
  • State wages and compensation remains the largest category of spending, accounting for 34.4% of consolidated expenditure – a level which the Finance Minister described as “unsustainable”. Measures are in place to realise a R27 billion reduction in spending here, he said.


  • The big topic on everyone’s mind in the lead up to the budget was bailouts for SOE’s – and especially what was going to be done with Eskom.
  • According to Mboweni government will not take on the power utility’s debt, as has been suggested by Eskom in the past.
  • “I want to make it clear: the national government is not taking on Eskom’s debt. Eskom took on the debt. It must ultimately repay it,” he said.
  • However, he said that the restructuring plan – to split Eskom into three entities – is on track, and Treasury is setting aside R23 billion a year for the next three years to financially support Eskom during its reconfiguration.
  • The total of R69 billion is a “shareholder” move to assist the utility to pay its debt, however, it comes on the condition that Eskom cuts cost to cover debt-service costs and meet redemptions.

Land Reform:

  • While the government pushes ahead with its plans to make land expropriation without compensation more clear in the Constitution, Treasury is also allocating funds to accelerate land reform and acquire state land.
  • R18.4 billion has been allocated to accelerate land reform over the medium term, which will help finalise more than 1,700 restitution claims and acquire more than 325,000 hectares of land for landless South Africans.
  • This budget was presented by the ex-Governor of the SARB. He is highly competent and politically connected, but what I like about him most of all is untainted and honest. Can we do with a bit of those virtues right now!
  • Honestly, our country is in a shocking state after 10 years of Zuma [trust my maths, please, with at least 4 more years to come as “aftermath’]. However, whether Tito stays or goes, another strong Finance Minister will replace him and we will get through this. Again, honestly, the demise of Eskom is too horrific to contemplate so let’s get on the bright side. “Too big to fail”, was the way the World Bank or IMF described Eskom.

All of that said, in the property industry we will enjoy:

  1.  A 1.5% GDP growth this year – hopefully!!
  2. No increase in property-based taxes.
  3. A slight narrowing in affordability though we need to wait for Eskom’s tariff announcement.
  4. Probably, stable to improved job statistics.
  5. Better house sales year-on-year [I believe].

Compared to what we have lived with while we get out of the mess and approach the General Elections, I would take this if I was you.

HLJ does take it and remains positive.

Yours in Property.

Jack Trevena
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