Budget Speech commentary 2023
The budget speech showed some positive moves forward with supportive measures being given to SME's to help them navigate the challenging economic conditions, several positives for the agriculture sector, the first being the required allocation to deal with the energy crisis. Then there was a welcome commitment to put measures in place to respond to the impact of severe weather events and the tax incentive rebates relating to the installation of new and unused solar panels, were all huge steps forward.
It was not all sunshine though as the minister said we should be prepared for the possibility of South Africa being placed under a grey listing. This was after he recognised the need to be more effective in implementing our laws, particularly in fighting organised and sophisticated crimes.
You will find numerous articles below that we have gathered from the industry on the National Budget speech
Major debt relief for Eskom eclipses the budget
Major debt relief for Eskom eclipses the budget, but difficult budgeting trade-offs lie ahead to maintain fiscal restraint, says Sanisha Packirisamy – Economist at Momentum Investments.
- A debt relief package of R254 billion (R168 billion in capital and R86 billion in interest) announced, over the next three years, which addresses 60% of Eskom’s current debt, split as follows: R78 billion in FY23/24, R66 billion in FY24/25 andR40 billion in FY25/26. In FY25/26, government will directly take over R70 billion of Eskom’s loan portfolio.
- Although Treasury stuck to its guns on fiscal consolidation and adhered to a prudent approach to spending, market participants remain wary of the tough fiscal decisions that must be taken to further support other state entities, to address the cost-of-living crisis that civil servants face and to increase government’s financial reach to the most vulnerable.
Storm warning, grey on the horizon
On Friday, South Africa is set to know if it is being included on the FATF’s grey list. If the FATF’s International Co-operation Review Group remains unconvinced ahead of its plenary taking place on 22–24 February 2023, South Africa will be subjected to increased monitoring or “grey listing”. - Krevania Pillay, Senior Associate in the Construction & Engineering, and Corporate Investigations Sectors in the Dispute Resolution practice at Cliffe Dekker Hofmeyr .
Momentum's Financial Experts Weigh In on the 2023 Budget Speech
A collection of comments, reactions and quotes from Momentum's economists, tax gurus, financial advisers and other experts on the 2023 Budget Speech.
- "The support package for business was very pleasing, while the support package for individuals was somewhat lacking." "I am also very concerned about what seems to be an imminent grey listing." - Hannes van den Berg: CEO: Consult by Momentum
- "The government is back to being a going concern – which is good news. The revenue exceeded non-interest expenditure and it was able to provide personal income tax relief to consumers" - Johann van Tonder - Economist for Group Strategy: Momentum Metropolitan
- "I found today’s Budget disappointing from a retirement reform perspective as we didn’t get the detail we need to ensure that we can land the two-pot system efficiently come 1 March 2024." - Rowan Burger - Head of Strategic Finance: Momentum Metropolitan
- The Budget left me feeling hopeful. What caught my attention was the skills emigration review – this will help us take stock of the existing skills potential in the country, and we don’t find ourselves importing skills that could be readily found here – especially when youth unemployment is so high. - Nkosinathi Mahlangu - Portfolio Head of Youth Employment: Momentum Metropolitan
Tax breaks for renewable energy
“The minister is to be congratulated on his foresight to increase the Section 12B tax allowance from 100% to 125%. This means that businesses will definitely look to invest in solar which will assist with the energy crisis in SA." - Jeff Miller, founder of the Twelve B Green Energy Fund
“In terms of the Twelve B Green Energy Fund, this move will give our investors an increased return from 14% to 18%, which is an unbelievable return for a moderate risk investment."
Broadly as expected, but risks persist
"Investors will naturally still be concerned about the downside risks to the economic growth trajectory amidst the surge in loadshedding and a less supportive global economic backdrop, as well as upside risk to spending on social grants, wages and SOE support. While we share these concerns about the potential risks, the forecasts seem to be a reasonable baseline." - Dr Elna Moolman, Head: South Africa Macroeconomic, Fixed Income & Currency Research at Standard Bank South Africa
Consolidation intact even as the economy confronts headwinds
"The budget addresses critical challenges facing the economy such as the need to improve spending on infrastructure, strengthen the criminal justice system, alleviate constraints in healthcare and the energy crisis that is crippling the economy. To achieve these objectives, expenditure has been increased and reprioritized over the MTEF." - FNB Wealth representatives
Markets breathe a (small) sigh of relief
"Markets received Budget 2023 positively, evident in a near-20 basis point (bp) rally in the benchmark 10-year yield and the 20c rally in the rand versus the dollar. While these are not exceptionally large moves, they do signal a positive stance or at least relief that the government has not changed tack on its fiscal strategy." - Carmen Nel, Economist and Macro Strategist, Matrix Fund Managers
Renewed optimism for agriculture following bold reforms in the 2023 Budget
"There are several positives for the agriculture sector and the first being the required allocation to deal with the energy crisis as loadshedding has started to impact negatively on food production thus a potential threat to food security." "Agribusiness will benefit from being included in the refund of the Accident Fund levy for diesel used in the manufacturing process given the huge costs associated with operating generators for extended periods due to load shedding."- Paul Makube, Senior Agricultural Economist, FNB Commercial
The Impact of the budget speech for SMEs
SMEs have had to navigate challenging economic conditions over the last 18 months with worsening load shedding and the increasing interest rate environment. Having the necessary government support to stimulate the economy is key to survival. The finance minister has given some hope to SMEs in the National Budget Speech. There are a few supportive measures that have been provided to navigate these challenging economic conditions. - Palesa Mabasa, Business Development Head: SME Funding at FNB
Budget 2023: As good as could be hoped for
Budget 2023 is as good as we could have hoped for, given current economic conditions. The National Treasury has lifted the expected government debt trajectory, but, importantly, it continues to map a path to fiscal sustainability and a lower government debt ratio in the long-term. - Arthur Kamp, Chief Economist at Sanlam Investments
Positive steps taken in 2023 Budget
"We welcome government’s commitment to put measures in place to respond to the impact of severe weather events. Government’s plans around disaster response services will hopefully mean that the damage we see from these events will reduce or be contained in certain areas." - Lerato Bacela, Financial Director at Old Mutual
"We welcome the tax incentive rebate relating to the installation of new and unused solar panels, which is a positive step towards renewable energy generation." - Tarina Vlok, MD of Elite Risk, a subsidiary of Old Mutual Insure
2023 Budget: A taxing balance
"The 2023 Budget speech was delivered against the backdrop of high living costs, a dismal unemployment rate and intensive loadshedding crippling businesses, all of which are placing severe strain on South Africa’s economic recovery and growth. Carla Rossouw, head of tax at Allan Gray looks at some of the key take-outs.
Load-shedding in the crosshairs
"Budget 2023 announced incentives worth R9 billion for businesses and households to invest in renewable energy, including solar power generation. Businesses were previously allowed to deduct the costs of qualifying renewable energy investments over a three-year period. Now, companies will until February 2025 be able to claim a 125% deduction in the first year for all new renewable energy projects brought into use from next month, including wind, concentrated and photovoltaic (PV) solar, hydropower and biomass. The National Treasury has set aside R5 billion for this." - PwC
Budget 2023: Key outcomes from tax experts
The fact that gross tax revenue projections have been revised upwards by over R10 billion is testament to the significantly improved tax collection efforts by SARS. This is an immensely positive outcome – an indication that the “changing of the guard,” under the leadership of Commissioner, Edward Kieswetter is beginning to bear fruits. - Tax experts at Mazars in South Africa
Budget 2023: Positive signs to start moving forward as a country
"The budget was always going to have an infrastructure focus, mainly looking at Eskom and what will happen to the debt. And then also at other initiatives on spending in the infrastructure space, including on water and sanitation, as well as transport and logistics given the level of decay in on all of those areas, and the budget did not disappoint in this regard." - Find comments from various economist including KPMG and Investec
Navigating an uneven economic recovery
"The National Budget Review notes that South Africa is prioritising stable and clear policies so as to promote economic growth in the midst of an uncertain economic outlook. GDP is expected to grow by 0.9% in real terms in 2023, compared with an estimate of 1.4% at the time of the latest Medium-Term Budget Policy Statement. This rate of economic expansion is well below the pace required to generate significant employment growth and to support national development." - Norton Rose Fulbright
