Finance Minister Tito Mboweni has unexpectedly scrapped plans to raise R40bn in taxes over the next three years in his 2021 budget speech, making an unprecedented bid to boost South Africa’s economic recovery by easing the financial pressure on embattled businesses and households.
A surprisingly strong pickup inactivity, when lockdown restrictions were eased last year, had alleviated the magnitude of the anticipated blow to tax revenues after the Covid-19 pandemic struck, making the step possible, he told parliament on 24 February.
Last year’s recession remains the worst since World War II, but the bounce in output in the final quarter also means that the economy is likely to have contracted by 7.2% in 2020, less than earlier forecasts of 7.8%.
The shortfall in tax revenues for the financial year which ends in March will amount to just R213bn compared with a previous estimate of R312bn, due to a surge in corporate income tax, which was boosted by the impact of higher commodity prices on mining companies.
“Given the better-than-expected revenue performance, there is no longer a need to implement these measures and their withdrawal will not widen the budget deficit,” the Treasury said in its 2021 budget review.
The windfall also helped reduce the expected budget deficit for the financial year 2020/2021 to 14%, compared with an earlier prediction of 15.7%, and lowered SA’s unsustainable debt trajectory, which absorbs a fifth of its tax revenues with interest costs. The rand responded positively to this figure and rallied 1% against the dollar immediately after the first budget-related headlines were released by wire news services.
This story is from the 4 March 2021 edition of Finweek English.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the 4 March 2021 edition of Finweek English.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber? Sign In
THE HEALTH OF SA'S MEDICAL SCHEMES
As the Covid-19 pandemic abates, finweek takes a look at the financial performance of some of the largest players.
The effect of Gilbertson's departure
With Ntsimbintle Holdings now the major shareholder of Jupiter Mines, it could change SA’s manganese industry.
Making money from music
Why investors are increasingly drawn to the music industry.
Conviction is key
Sandy Rheeder plays a critical role in Mukuru’s mission to open up financial services to the emerging consumer market in Africa through tailor-made technology solutions and platforms.
The post-pandemic toolkit
How CFOs can use technology to support growth.
Big city living exodus
Mini cities like Waterfall City and Steyn City are redefining city-style apartment living.
Big compact, big value
Handsome, with a hefty level of standard specification, the roomy Haval Jolion compact crossover is a great value proposition.
On barriers to entry
There are various ways in which a company or sector can achieve competitive dominance. They usually make for good investments.
Fear and greed in one index
To buck the trend, when markets are hot or cold, is a tough thing to do. However, it can deliver solid returns.
Africa's largest data centre facility coming soon
Vantage Data Centers plans to invest over R15bn for its first African data centre facility in Attacq’s Waterfall City.
