Welfare instability is highlighted
The concerning news is that over the next three years the government will be spending about 60 percent of non-interest spending on social welfare. This shows the perilous state of many struggling citizens due to the sluggish GDP growth and the negative economic effects of the pandemic
Fiscal responsibility demonstrated
The good news is that the windfall from higher commodity prices and the additional tax revenue collected due to that, will be used to reduce debt. Any debt reduction is good news as it has the potential to make a start to improve our credit ratings.
Opportunity to increase profitability
More good news is the reduction of corporate taxes – although a very small margin, the ultimate impact will increase profitability slightly for companies. This also encourages FDI and the opportunity for South African corporates to be more profitable and could make a small impact on investor markets.
No fiscal drag
The effect of no fiscal drag on individuals is also good news. Although inflation has pushed up wages, the tax brackets have been increased, and we won’t be paying any more tax. You’ll have to be earning more than R91 250 in the next tax year before you pay tax.
Free flow of capital
More good news with the relaxing of exchange controls with the further liberalisation of offshore limits. Offshore limits for financial institutions were increased from 30% to 35% and to 45% when including investing in Africa. Thus giving South Africans the opportunity to further invest wherever they see global opportunity.