Strategy& economist lays down fundamental expectations from upcoming budget

26 October 2018 Authored by Consultancy.co.za

With the impending release of South Africa’s Medium-Term Budget Policy Statement (MTBPS), an economist at PwC’s Strategy& vertical in Cape Town Christie Viljoen has put forth five key factors that need to be addressed by the country’s Finance Minister Tito Mboweni.

The first of these expectations is the declaration of zero-rating on value-added tax for select consumer goods. A number of recommendations have been made by a panel with respect to new additions to the zero rating list, including white bread, school uniforms, sanitary products and nappies.

There are also calls for chicken products to be added to the list. Such a deicision is expected to take time, according to Viljoen, given the cost-benefit analysis required when weighing VAT revenues against the welfare coefficient. Nevertheless, he expects the minister to indicate an approximation of the expected time during the MTBPS.

The second question that Viljoen expects to be addresses is the crucial one of fuel prices, given their current position at an all time high. Taxes on fuel retail and wholesale appear to be currently locked at high levels, resulting from the ratification of the 2018/19 fiscal budget released earlier this year.

Strategy& lays down fundamental expectations from upcoming budget

In order to tackle the unforeseen spike in fuel prices, the National Treasury and the Department of Energy have assembled a specialised team to help mitigate the effects of the spike on households as well as on the business environment. Viljoen expects the minister to address this issue, given that another spike is expected in November.

The third issue that Viljoen feels is of urgent importance is the balancing of the substantial developmental expenditure promised by the President Cyril Ramaphosa against the strain on public coffers, particularly in light of already stretched tax revenues. The MTBPS will expectedly include a declaration of expenditure priorities.

The last two questions that Mboweni is expected to tackle are those of unemployment and infrastructure. South Africa currently has a monumental unemployment rate of 28% – a problem that is set to be further accentuated by the advent of automation, which currently threatens 5.7 million jobs in the country.

The Strategy& Economist expects a ten-year extension to be announced in the current tax incentive for youth employment. In terms of infrastructure, the MTBPS will expectedly elucidate the framework for the President’s infrastructure fund, which is anticipated to tackle the dual issue of unemployment and the lack of infrastructure. 

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