Budget 2023
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Nene unlikely to escape controversy in budget

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Cape Town - Finance Minister Nhlanhla Nene may be forced to make a few unpopular decisions in his National Budget speech on Wednesday, according to Kemp Munnik, head of tax services at SizweNatsalubaGobodo.

He anticipates Nene will be unable to escape controversy, when he delivers his maiden budget at 14:00 on Wednesday.

These unpopular decisions would come in the light of raising the targeted R12bn in revenue Nene mentioned in his mini budget last year, together with government’s intention to honour its R23bn commitment to ailing power utility, Eskom, as was indicated in the recent State of the Nation address.

READ: Zuma: 'Top priority' Eskom to get R23bn

“While there are always a lot of issues at play, in my opinion politically it would be the right time for government to consider increasing VAT by a percentage point. Considering that internationally it is comparably low, should government not opt to implement it now, they will be forced to wait until after the 2019 elections," said Munnik.

"While the percentage point increase will naturally impact the poor, resulting in some negative backlash, it will, however, contribute to raising the R15bn towards the deficit."

He said the fact that the timing is right in that the oil price has dropped and remained stable, makes it extremely likely that a fuel levy will be utilised to raise a chunk of the revenue required in the coming fiscal year.

“Whatever measures the minister opts for in terms of raising revenue, it remains to be seen, in light of the Eskom debacle, how government intends implementing workable solutions to successfully navigate what looks to be a challenging financial year,” said Munnik.

READ: Budget speech: Who to tax?

Retirement and savings

Meanwhile, principal consultant at Old Mutual Corporate Michelle du Toit said she expected Nene to bring further clarity on government's commitment to positive retirement outcomes for retirement savings, as well as society at large.

Du Toit said at the same time select retirement fund reform outcomes planned for 2015 have been delayed to 2016, and possibly 2017.

“It is encouraging that discussions around retirement reforms are still taking place between government and industry, and Old Mutual Corporate welcomes the implementation of reforms in the near future due to the positive and concrete step these will have in contributing to improving savings levels and income during retirement in South Africa,” said Du Toit.

She added that more steps need to be taken to effectively promote efficient retirement savings and she expects the 2015 budget speech to provide further clarity on some of the proposals that have been under discussion.

“Useful clarity may come in the form of final implementation plans for taxation changes affecting contributions, certain aspects of the tax free savings vehicle, mandatory preservation and implementation thereof, possible proposals on post retirement aspects of the reforms, such as default annuities, or even on the potential national savings fund," she said.
 
“One of the concerns from a savings point of view would be possible increases in taxes on interest, dividends or capital gains, particularly if they affect investment growth, as this may have a unfavourable impact on the propensity to save.”

READ: Rand gains after GDP surprise, focus on budget

Growing need to save

Du Toit added that initiatives to educate South Africans on the growing need to save should be identified.

Research by Old Mutual highlights the poor financial outcomes many South Africans currently face. The Old Mutual Retirement Monitor found that 85% of respondents felt that not having enough money to retire was their greatest retirement concern.

In addition, the 2014 Old Mutual Corporate Auto Enrolment Research Report revealed that the majority of respondents hold a bleak outlook of their current financial situation, with 52% stating that they were not satisfied at all with their current retirement provision, and only 7% reported being completely satisfied.

ALSO READ: Nene's budget stymied by political realities

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