All things in moderation – balance is best. As forecast, Finance Minister Enoch Godongwana stuck to the basics, with a Budget focused on “striking the critical balance between saving lives and livelihoods, while supporting inclusive growth”. Like many South Africans do every day, the minister walked a tricky path between juggling new spending pressures, while keeping a tight handle on debt.
There’s inspiration to be found in the minister’s measured approach. It’s been a harrowing few years and the financial and psychological impact has been profound. Now, it’s time to focus on the future and control what we can, says Farzana Botha, segment solutions manager at Sanlam Savings.
Godongwana was keenly aware of the significant financial pressures South Africans are feeling right now, saying, “Now is not the time to increase taxes and put the recovery at risk! We need to keep money in the pockets of South Africans.” Happily, tax restraint was shown. Based on revenue improvement, the government is proposing R5.2 billion in tax relief, provided primarily by adjusting personal income tax brackets and rebates by 4.5% in line with inflation. Botha says: “We are very pleased with this decision as tax hikes could be crippling in the current environment. We respect the minister’s move to focus on economic stimulation to ultimately broaden the tax base.”
Excise duties, however, are increasing, and should be noted by South Africans. A 340 ml beer or cider is increasing in price by 11c more, a 750 ml bottle of wine by 17c more, sparkling wine by 76c, cigarettes by R1.03, and piped tobacco by 37c. Government will also introduce a new tax on vaping products of at least R2.90 per ml from 1 January 2023.
While the windfall from high commodity prices has boosted revenue, as Godongwana poetically put it, “one swallow does not a summer make”. The government won’t plan permanent expenditure based on short-term gains. Right now, demands are deafening, with social welfare and state-owned enterprises (SOEs) outlined as major risks to consolidation.
Total consolidated government spending is set to amount to R6.62 trillion over the next three years, with the social wage bill accounting for close to 55% of total non-interest spending. South Africa now pays grants to nearly half the population (46%) and the social relief of distress grant has been allocated R44 billion for another 12-month extension.
Botha says: “It’s good news for consumers that there will be no increase to fuel and road accident levies as the ongoing petrol price increases are causing serious strain for all South Africans. Consumers must be mindful of the increase in carbon fuel levy (9c for petrol and 10c for diesel). We are pleased to hear that government has committed to a full review of the fuel pricing model as a matter of urgency.
“Additionally, we’re keeping a close eye on the impending pension fund reforms the minister mentioned – changes to Regulation 28 and the so-called ‘two pot’ system. We’re expecting more clarity on how this will transpire in the coming months. Ultimately, we support the aim to unlock investment in much-needed infrastructure across Africa, provided this is carefully managed.”
Botha says that South Africans need to take a similar measured mindset to the minister. “The minister made it clear we need to make some difficult trade-offs. This applies to many of us right now. We’re told to save more. To stop spending so much. To budget. To invest. To start an emergency fund. To save for retirement. To manage debt. To save for our children’s schooling. These are all things we know we need to do. But it’s incredibly tough to balance these demands when money is tight, the country’s mood is subdued, and there’s still a feeling of global uncertainty.
“Many of us have lost loved ones and livelihoods during this time. When one is in a difficult emotional space, it becomes very hard to manage money as well. That’s when seeing a financial adviser really can make a difference. They can provide a holistic plan that’ll help you move towards financial confidence and follow a step-by-step roadmap to reach realistic goals.”
Botha says that her suggestion is to start small. “Just start. Even if you’re saving R50 a month, just start. Try to put that money into a savings account that’ll earn you interest. If you contribute consistently, you’ll see compound interest start working its magic. All too often, we think we need a big sum to start saving. That’s not true. There’s a lot you can do with a little.”
South Africans should consider having their own ‘budget speech’ moments. “We often tend to avoid money talk because it feels awkward or overwhelming. Use the budget speech as inspiration to have a household chat about money matters. Take the opportunity to reprioritise your finances and decide on shared goals for the year. Play open cards about what you want to improve on, individually and together.”
Ayanda Ndimande, head of Sanlam business development for retail credit, says debt also needs to be a big part of the discourse. “The minister is taking big steps to get South Africa’s spiraling debt under control. Our country’s debt is taking precedence over other spending priorities. Many South Africans are finding the same applies to their finances.
“In December 2021, the 2021 SA Reconciliation Barometer found that close to 50% of all South Africans have been unable to pay their debts or have lost income in the past six months. It can feel impossible to save when one is in that situation. A systematic ‘snowball’ approach can work. Start by paying off the smallest debt first to free up funds. Then, pay off the next smallest debt – and save while doing so – and so on. The sooner you start, the sooner you will feel like you’re taking back control.”
Botha says that Sanlam commends Minister Godongwana’s focus on growth-enabling policies and fiscal consolidation. “The minister said, ‘you won’t realise the distance you’ve walked until you look around and realise how far you have been’. You may not feel like you’re making progress, but if you get a plan in place and consistently make regular contributions, one day you’ll realise just how far you’ve come to achieving your goals.”
PERSONAL FINANCE