By African Unity Life
The 2019 National Budget Speech took place on 20 February and Finance Minister Tito Mboweni announced the government’s budget allocations for the year. These budget announcements have an effect not only on the country’s finances but also on the personal finances of South African citizens. In order to empower our everyday heroes, we’re unpacking the 2019 National Budget Speech to clarify what it means for everyday citizens and their personal finances and budgets.
There are a few main aspects to focus on when assessing the effect of the budget speech on South Africans, these include interest rates, VAT, debt, inflation, unemployment funding and grants. We’ll take a look at each of these aspects and clarify the effect the 2019 National Budget will have on each of them.
Even though the government will increase interest rates on loans and debt, the government will have to borrow an astounding R243 billion. This will result in interest of R1 billion per weekday. This means that the government will employ any necessary means to ensure they bridge the gap between income and expenditure.
Due to the possibility of a credit downgrade, announced by the National Treasury, South Africa is likely to leave the World Government Bond Index. This means that the government and banks will experience an increase in the cost of lending, so South African citizens can expect an increased interest rate.
While the government will take on a R1.1 billion cost to expand the zero-tax list, South Africans can expect an increase in sin tax, with the exception of sorghum beer, as well as spikes in fuel tax. In addition to the increase in fuel tax, the government is also introducing a carbon tax on petrol and diesel, meaning another spike in fuel costs.
Even though the government announced the lowest tax increase in half a decade, they will not adjust tax brackets to absorb inflation. This means that a salary increase to counter inflation will result in more tax being paid.
Unemployment and Grants
From 1 March 2019, employers will be able to claim the full R1000 per month for employees earning no more than R4500 per month. Once employees reach R6500 per month, this decreases to zero.
As far as grants are concerned, both old age pensions and child grants have increased. While old age pensions have increased to R1780, child grants are set to increase to R420 in April, with another increase in October to R430.
Considering these governmental budgetary adjustments, everyday South Africans will have to adjust their budgets to counter the discrepancy between spending power remaining the same and expenses inflating. That being said, the effect should not be more severe than in recent years, so citizens will likely be able to adjust relatively easily.