Finance Minister Enoch Godongwana said South Africa’s finances are turning the tide.
Godongwana delivered his inaugural Budget of R2.16 trillion on Wednesday.
It is his first Budget since being appointed as finance minister in 2021.
Gondongwana said while the fiscus was turning the tide, he warned that government debt was dangerous.
“It has reached R4.3 trillion and is projected to rise to R5.4 trillion over the medium term. On average, 20 cents of every rand collected in government revenue is now being spent on debt repayments, which is crowding out spending on health and basic education.”
However, there was good news.
Godongwna said that tax revenue collected for the past year was R182 billion more than budgeted thanks in part to stronger-than-expected personal income tax collections and VAT.
“The improved revenue performance is not a reflection of an improvement in the capacity of our economy. As such, we cannot plan permanent expenditure on the basis of short-term increases in commodity prices.”
Godongwana said personal income tax brackets have also been adjusted to bring relief.
“Middle income earners will benefit from an adjustment in the income tax brackets, which will see the annual tax-free threshold for persons under the age of 64 increasing to R91,250. Medical tax credits will increase from R332 to R347 per month for the first two members and from R224 to R232 per month for additional members.”
Godongwana allocated extra money to compensate teachers.
“In this budget, we are adding R24.6 billion for provincial education departments to address the shortfalls in the compensation of teachers.”
For the first time since 1990, National Treasury has decided not to increase the fuel levy and Road Accident Fund (RAF) levy that contribute to the hefty costs of petrol and diesel.
“This will provide tax relief of R3.5 billion to South Africans. There will also be no increase in the Road Accident Fund levy.”
Hikes in excise duties on alcohol and tobacco were kept in line with inflation (between 4.5% and 6.5%) from above 8% last year.
“Government also proposes to introduce a new tax on vaping products of at least R2.90 per milliliter from 1 January 2023.”
Monthly social grants have been hiked by between 1.9%, for foster care grants, and 5% for old age, care dependency and disability.
- Old Age increases by R90
- War Veterans increases by R90
- Disability and care dependency grants increase by R90 in April and a further R10 in October.
- Foster Care increases by a once off R20 in April
- Child Support Grant increases by a once off R20 in April
Godongwana also announced a new extended child support grant for double orphans to encourage the care of orphans within families rather than foster care.