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THE BIG STORY: TITO HOLDS THE LINE BUT WHO WILL PAY THE PRICE?

With a huge debt burden to manage, a pandemic to be curbed, and ratings agencies breathing down his neck, finance minister Tito Mboweni cut government spending during his budget this week, while sparing the middle class a bit of pain.

Mboweni is also holding the line against public sector unions, refusing to give in on a wage freeze which will ease the pressure on the country’s balance sheet, as Financial Mail columnist Clair Bisseker put it this week. 

Here’s how the budget affects you:

  • Your personal tax increases won’t increase, thanks to… you! Last year, government was able to rake in R40bn MORE in tax revenue than expected, so it doesn’t have to shake us down for more taxes now.
  • If you own a company, you’ll get some relief by paying slightly less tax.
  • If you’re a smoker or drinker, you’ll be paying more for your “sins”.

Other big developments include R9bn allocated to the vaccine rollout programme, with the private sector funding the rest.

But here’s the rub: with the twin issues of high government debt and money needed for vaccines, Mboweni has had to cut some government programmes. On the one hand, this is necessary as government spending is one of the major issues affecting our credit ratings, and our constrained finances long term.

But on the other hand, these kinds of cuts hurt the poorest. Social grants will effectively decrease from April, as payments won’t keep up with inflation. The special distress grant ends that same month. Mboweni said we just can’t afford more. 

Higher education, land reform programmes and funding to non-profit organisations will also take a knock. One solution is spending one’s way out of a crisis with stimulus packages as the US is doing, but we just don’t have the cash reserves to do that. 

This article appeared as part of The Wrap, 25 February 2021. Sign up to receive our weekly updates.