Key points from #BudgetSpeech2018

On Wednesday, Minister of Finance, Malusi Gigaba presented the 2018-19 budget in Parliament. The Minister says government wants to raise an additional R36bn for the fiscus.  In his opening remarks, this is what Minister Malusi said:

"This is a tough, but hopeful budget. It required us to make difficult but necessary trade-offs, important to ensure that this budget is a platform for renewal, inclusive growth and job creation.

It directs spending to our most pressing national priorities: educating our youth, protecting the vulnerable and investing in enablers of inclusive growth.

It moderates spending and raises the revenues required to contain the growth in national debt, whilst trying to minimize negative effects on growth."

Here are key takeaways from today's budget speech just in case you've missed it.
  • The 2017 GDP growth projection has been revised upward to 1 per cent, which is higher than the 0.7 per cent expected at the time of MTBPS last year. We are anticipating growth of 1.5 per cent in 2018, rising to 2.1 per cent in 2020.
  • Despite an improved outlook, government still faces a revenue gap of R48.2 billion in the current year, which carries through to the outer years of the medium-term expenditure framework.
  • A fund with an allocation of R2.1 billion over the medium term is being developed between the Departments of Small Businesses, Science and Technology and the National Treasury to benefit small and medium enterprises during the early start-up phase – this is an area that has historically had limited support because of the risks involved.
  • A 52 cents per litre increase in the levies on fuel, made up of a 22 cents per litre for the general fuel levy and a 30 cents per litre increase in the Road Accident Fund Levy.
  • Over the medium term, the NHI is allocated an additional R4.2 billion, funded through an amendment to the medical expenses tax subsidy. Overall, government will be spending R205 billion on health in 2018/19 growing to R240 billion by 2020/21.
  • The Old age, disability and care dependency grants will increase on 1 April 2018 from the existing R1600 by R90 to R1690 and by a further R10 to R1700 on 1st October 2018. The Child Support grant will increase from the baseline of R380 to R400 on 1 April and to R410 on 1 October. This is a 6.6% annual increase.
  • VAT is going up from 14% to 15% from April 1 this year, to raise R22.9bn more for the fiscus. 
  • A higher estate duty tax rate of 25% for estates greater than R30 million,
  • An increase in the ad-valorem excise duty rate on luxury goods from 7% to 9 %.
  •  Increases in the alcohol and tobacco excise duties of between 6 and 10 %.
  • A below inflation increase in the personal income tax rebates and brackets, with greater relief for those in the lower income tax brackets,
  • Debt service costs are expected to grow by 9.4% between 2017-18 and 2020-21, costing R180bn in 2018-19. Noninterest budget expenditure is expected to remain stable at 26.6% of GDP.
  • Funding for free higher education and training for poor students will amount to R12.4bn in 2018-19, R20.3bn in 2019-20 and R24.3bn in 2020-21. This is in addition to the R10bn provisional allocation made in the 2017 budget.
  • Treasury believes that raising VAT “is less harmful to growth than raising other taxes”.
  • R85.7bn has been cut from government spending over the next three years in a bid to accelerate the drive to narrow the budget deficit and stabilise debt
  • This coming fiscal year alone, government has allocated over R200 billion for peace and security and another R200 billion for economic development to build a safer country and to grow our economy inclusively.
  • Over the medium term, R3.8 billion allocated to the School infrastructure backlogs grant will replace 82 inappropriate and unsafe schools, and provide water to 325 schools and sanitation to 286 schools.
  • Government will phase in fee-free higher education and training to students from poor and working-class families. This means that all new first-year students with a family income below R350 000 per annum at universities and TVET colleges in the 2018 academic year will be funded for the full cost of study. This will be rolled out in subsequent years until all years of study are covered. Returning NSFAS students at university will have their loans for 2018 onwards converted to a bursary.
  • A provisional allocation of R6 billion has been set aside in 2018/19 for several purposes, including drought relief and to augment public infrastructure investment.
In conclusion this is what the Minister said: 

"Let this be the year of renewal, revitalization and a step change in progress in fostering inclusive economic growth which rolls back unemployment, poverty and inequality.

The opportunity is before us.

To take advantage we need to be able to see beyond our individual interests to the national interest, as Madiba so often did, and to find common ground.

Let us work together to create a better life for every citizen and inhabitant of our beloved country."

What do you think of the budget?