Winners and losers in Godongwana’s Budget

South African Finance Minister Enoch Godongwana delivered his annual budget to lawmakers in Cape Town on Wednesday.

The country’s macroeconomic position improved markedly from a year ago, with public debt having stabilized and government coffers benefitting from a surge in mining income.

Here’s a rundown of who will be impacted:

Winners

Individual taxpayers

Godongwana scrapped previously announced plans to raise an additional R20 billion in taxes after revenue collection beat expectations thanks mainly to a commodities boom.

Personal-income-tax brackets and medical tax credits will be adjusted for inflation, the first time in three years such relief has been provided.

Capital-gains-tax and donations-tax exemption thresholds were also raised, as were contribution limits for tax-free investment savings accounts and retirement funds.

Small businesses  

Asset disposals by small business of as much as R15 million will be exempt from capital gains tax, a 50% increase on the current limit.

Value-added tax registration thresholds will also be raised, while turnover taxes for micro businesses will be adjusted to take account of inflation.    

Construction companies

The government is ramping up investment in logistics, energy, water and sanitation projects, with the budget providing for 1.07 trillion rand in infrastructure investment over the next three fiscal years.

With the government and state companies lacking implementation capacity, a slew of contracts should be up for grabs. 

The security forces

The police force and the military were each allocated an additional 1 billion rand to help them tackle organized crime.  

Bondholders

The National Treasury said its borrowing requirement has declined “markedly” since a year ago, in part because it collected more tax than anticipated, and that the budget deficit will come in slightly lower than expected. Those developments should continue to drive bond yields down, which will benefit existing debt holders. 

Losers

Smokers and drinkers

Godongwana raised taxes on alcohol and tobacco, increases that have long been standard fare in the budget. Duties on beer, wine, spirits and cigarettes will all rise by 3.4% with effect from April 1.

Motorists and commuters

The budget provides for increases in the general fuel levy, the Road Accident Fund levy and carbon taxes. In total, taxes charged on a liter of 93 octane gasoline will rise by 21 cents to 6.58 rand. The effect on pump prices should be more than offset by lower international crude prices, although there’s no certainty those will hold. 

Defaulting municipalities 

State power utility Eskom will take over the distribution of electricity in municipalities that fail to settle outstanding debts – a measure the Treasury says is needed to ensure revenue is collected and reliable services can be maintained.

The adoption of the so-called Distribution Agency Agreements has the potential to deprive local authorities of a key source of income.

The municipalities’ arrears to Eskom has steadily risen, with those participating in a so-called Municipal Debt Relief Program owing Eskom R85.2 billion.