With the inauguration of South Africa’s new president, Cyril Ramaphosa, and the end of the Zuma era, expectations for national leadership and decision-making are running high.
On Wednesday the 21st of February, Finance Minister Malusi Nkanyezi Gigaba addressed the National Assembly to deliver the National Budget Speech for the 2018 year in RSA. On delivering the speech, Gigaba admitted that he had to make some “difficult decisions” in order to meet the demand for free higher education, as well as to address a shortfall in revenue.
Below is a short summary for those who missed it:
- All South African citizens face a 1% increase in VAT effective from 1st April 2018. The standard 14% had not changed since 1993. However, Gigaba stated that this increase was unavoidable in order to “maintain the integrity of our public finances.”
- The lower and working class will find some relief in the form of below-inflation increase in personal tax;
- We can expect a fuel increase of 52 cents per litre, and an increase of 30 cents per litre in the Road Accident Fund Levy;
- A higher estate duty tax rate of 25% for estates greater than R30 million in value;
- Smokers and drinkers face an increase of between 6% and 10% on alcohol and tobacco products;
- An increase in the ad-valorem excise duty rate on luxury goods from 7% to 9%.
*Ad valorem Excise duty is a fiscal measure imposed on certain locally manufactured goods and a corresponding Ad Valorem Excise duty (at the same rate) is imposed on imported goods of the same class or kind.
Overall, Gigaba presented a well put together budget which aims to increase revenue whilst shielding the poorest households from the increase VAT effects. Although “any plan is only as good as its implementation,” it seems that Gigaba has planned responsibly and given the tools used to reduce the budget deficit, South Africa’s economic future is looking positive during challenging times.