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In theory the budget speech wasn’t all bad, but practically ...

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Matshepo Msibi is the executive director of the Businesswomen's Association of South Africa. Picture: Tebogo Letsie/City Press
Matshepo Msibi is the executive director of the Businesswomen's Association of South Africa. Picture: Tebogo Letsie/City Press

Finance Minister Malusi Gigaba delivered his maiden 2018 budget speech on Wednesday, which followed the attitude of the state of the nation address that focused on rebuilding and inspiring hope to the citizenry.

The budget speech was well-balanced, even though it hit the consumer. It was even light-hearted at times with the minister quoting American rapper Kendrick Lamar.

READ: Malusi Giggleba: Light-hearted moments during a heavy budget speech

My first observation was the inclusion of Advocate Kholeka Gcaleka as part of the “power delegation”. This delegation, which acts in an advisory role to the finance minister, has historically been 100% male and is therefore a welcome change indicating a representation (albeit small) of the hard-working women behind the scenes at Treasury.

The rand and the markets reacted positively to the budget and it was hoped that this would satisfy the credit rating agencies and ignite confidence in investments in South Africa, especially because the current political climate has instilled a sense of hope which is likely to influence the country’s economic outlook.

The following allocations and interventions are welcomed:

• The R2.1 billion small, medium and micro-sized enterprises (SMME) start-up fund over the medium term expenditure framework that is being developed between departments of small business development, science and technology and the national treasury to benefit small and medium enterprises during the early start-up phase. The only fear is that implementation may be stalled as the responsibility to develop the fund is shared between many departments and no lead department was indicated.

• The R100 billion Black Business Growth Fund that has been created through the financial sector codes to assist black entrepreneurs to finance big deals – an intervention that is crucial to transforming capital allocation in the economy.

• R57 billion for fee-free higher education and training to students from poor and working-class families. All new first-year students with a family income below R350 000 per annum at universities and technical vocational education and training colleges in the 2018 academic year will be funded for the full cost of study, which makes up to 75% of the taxpayers. A strategy to sustainably fund this is required in the long term.

• R200 billion for peace and security. The hope is that the minister of safety and security and the police minister will detail how this allocation will be spent especially indicating how gender-based violence will be dealt with.

READ: 10 things you need to know about the budget

• R200 billion for economic development to build a safer country and to grow our economy inclusively.

• Government departments to practically pay suppliers within 30 days of invoicing, because this is the cause of many business failures. Proper monitoring needs to be done to ensure that departments are not maliciously complying by asking suppliers to amend the invoice date. It would be interesting to see government officials being successfully charged for financial misconduct.

• Though there is happiness with the review of all open-ended, “evergreen” contracts to open up opportunities for SMMEs and black-owned companies to participate; timelines and deadlines need to be set and published on when the review will be concluded and when the evergreen contracts will be terminated.

• Decisively dealing with anti-competitive behaviour which slows economic growth and dynamism.

The biggest worry, is the new tax measures to raise an additional R36 billion in 2018/19, mainly through a higher VAT rate from (14% to 15%) and below-inflation adjustments to personal income tax brackets. Though this increase is required in order to offset the budget deficit it is not recommended for the common man on the street and the lower income earners, especially with the 52c increase in fuel levy which will have a ripple effect on the cost of living. The current zero-rating of basic food items such as maize meal, brown bread, dried beans and rice and the increase in social grants will limit the impact on the poorest households.

READ: VAT rate to increase for first time in 25 years

Social spending will increase by 7.9% because government has taken deliberate steps to adjust social grant values above inflation to at least partially cover for the proposed increase in VAT, therefore an additional R2.6 billion will be spent on social grants, over the medium term. As per the state of the nation address, the president indicated that the government would ensure that social grants would continue to be paid without disruption.

In the same manner government must also ensure that the Child Maintenance Bill is implemented and monitored to guarantee that absconders are dealt with efficiently. This would disqualify a lot of recipients who were not supposed to be receiving these grants.

The finance minister was hopeful and anticipated a 1.5% economic growth in 2018. The wait is now for the different departments to detail how they intend operationalising the budget.

If the government can deal decisively with corruption going forward, then we will fully realise the benefits of the new dawn.

Matshepo Msibi is executive director of the Businesswomen’s Association of South Africa

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