Making sense of the 2021 Budget

Fellow South Africans,

I trust that you are well and staying safe during this unprecedented time in our history.

As you may be aware the latest budget speech was delivered by Minister Tito Mboweni last week and I would like to breakdown what the budget means for You and Your Finances.

The Minister was jovial and spent a lot of time giving us excellent detail about the forthcoming financial year. Interesting to note that South Africa is the most transparent country in the World when it comes to financial budget transparency.

This is largely due to measures put in place by the then Finance Minister Trevor Manuel and treasury continues many of these practices till today, this is indeed a great accolade. Let’s dive into the details:

No Increase In Personal Income tax:

Much to the surprise of some analysts who proposed an increase in taxes for the upper income earners, the Minister actually afforded all income earners a little leeway over and above inflation, this will provide a relatively small but appreciated easing in the PAYE (pay as you earn) tax brackets. In practical terms please refer to the pic below to see how much you will save in PAYE taxes annually. What this means is that an individual who earns R250 000 per annum will save approximately R1 580 per annum in PAYE taxes and we all say, “Thank you.” 😊

Increase in Taxes on Alcohol and Tobacco Products:

This is a trend that is taking place globally amongst treasury departments, so if you consume alcohol and smoke cigarettes the tax relief provided above will most likely make no difference to your life as you will be forking out a little more for your drink or smoke in 2021. These taxes will continue to rise year on year as the world moves toward a more health conscious society.

Government plans on not increasing its staff Salaries for the next 3 years:

Yes, you have read this correctly. The Minister is trying to close the budget deficit by controlling the spending habits of the government one of which is the incredible salary bill that it has to pay monthly. One of the ways it plans on doing this is through not increasing salaries for government employees over the next three years. This will most likely be taken to court by the labour unions but nonetheless the Minister is sending a clear message that He means business in terms of controlling expenditure. Take a look below at the South African Government Employee Salary Bill in relation to other countries. You will notice South Africa is way above the average of 10.2% the Minister is trying to bring our wage bill down closer to the Average.

Disappointingly there was not much mentioned about the plans to increase jobs, boost innovation and promote a high growth environment which many emerging markets are very bullish (confident) about i.e. India and China have forecast excellent growth rates of their economies of a low base 2020 due to COVID 19. South Africa needs more jobs and in order for this to take place, we need the private sector to Invest like never before. This is what SA needs and Hopefully at some point this is what treasury will bring forth on the table.

I trust you found value in the above article and wishing you the very best for the Month of March.

Kind Regards,

Roniel Chetty

Independent Financial Advisor

Adv Cert Financial Planning | MBS

The views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author’s employer, organization, committee or other group or individual. The blog does not constitute as financial advice in terms of the FAIS act. Chetstone Financial Consultants recommends that you contact a skilled, independent financial adviser for advice regarding financial planning. Info from this article is taken from a presentation by Chief Economist at Stanlib Investment Managers, presented by Kevin Lings.