By Gontse “GEe” Hlophe

Economic decline, haunting effects of Covid-19 and the worsening rolling power blackouts
weighed heavily on Finance minister Enock Godongwana when he tabled the 2023 Budget
Speech at the makeshift parliament at the Cape Town City Hall on Wednesday 22 February.
In January, economists warned about South Africa’s economy facing a 45% chance of slipping
into recession this year as electricity crisis deepens. 

A week before he tabled this speech, Godongwana’s boss, president Cyril Ramaphosa declared
a national state of disaster to deal with the country’s energy crisis. He even promised measures
to help businesses and households install rooftop solar systems. So, Godongwana was expected to address these issues and pull a rabbit out of the hat to effectively address fears that South Africa was collapsing, the rising cost-of-living, the country’s debt crisis, the collapse of services, public infrastructure and the unemployment crisis that remains stubbornly high.

Whilst the business sentiment was broadly positive, with many praising the he minister for
incentivisation of rooftop solar, energy support packages as well as relief in terms of personal
income tax, labour and the civil society was far from being impressed. They were critical of Godongwana’s failure to increase public service wages, failure to increase of basic income grant to R1500, budget cuts especially the spending in “critical areas of service
delivery.

Mindful of the global economic environment especially the declining economic growth and the
high economic risks including the ongoing war in Ukraine, Godongwana projected an optimistic
economic outlook for South Africa. “We are tabling the 2023 Budget in a difficult domestic and global economic environment. The global recovery is slowing. Domestically, load-shedding has become more persistent and prolonged, impacting on service delivery and threatening the survival of many businesses.
“South Africa’s economy grew by an estimated 2.5 percent in 2022. Real GDP growth projected
to average 1.4 percent from 2023 to 2025, compared with 1.6 percent estimated in October,”
he said.

The very bullish Godongwana went as far as promising economic growth despite the looming
economic hardship. “We are navigating this difficult environment with policies that support faster growth and address fiscal risks. Our pursuit of higher growth remains anchored on three pillars.

“Firstly, we are ensuring a stable macroeconomic framework to create a conducive
environment for savings, investment and growth. Secondly, we are implementing growth-
enhancing reforms in key sectors, particularly in energy and transport. And thirdly, we are
strengthening the capacity of the state to deliver quality public services, invest in infrastructure
and fight crime and corruption. In this Budget we are allocating additional resources towards
these endeavours without compromising the sustainability of public finances,” he said.

Addressing the power crisis, the Minister paid particular attention to Eskom’s debt trap. He
offered whopping R254 billion debt relief to Eskom. This will consists of two components, the
R184 billion which will fully settle Eskom’s debt in three trenches over the next two and half
years and second is a direct take-over of up to R70 billions of Eskom’s loans portfolio in
2025/26.

Godongwana said Eskom will not need any further borrowing during the relief period. He said
government was financing this arrangement through R66 billion baseline provision announced
in the 2019 budget, and R118 billion in additional borrowings over the next three years.
“The lack of reliable electricity supply is the biggest economic constraint. Record levels of load
shedding were experienced in 2022 – 207 days of load shedding compared to 75 days in 202,”
the Minister admitted.

He said in response, we are acting decisively to bring additional capacity onto the grid.
“We are also working to transform the electricity sector to achieve energy security in the long-
term. “As announced by the President, we will also introduce a new tax incentive for individuals to
install rooftop solar panels to reduce pressure on the grid and help ease loadshedding.
“Individuals who install rooftop solar panels from 1 March 2023 will be able to claim a rebate of
25 per cent of the cost of the panels, up to a maximum of R15 000. This can be used to reduce
their tax liability in the 2023/24 tax year,” said Godongwana.

He said to ease the impact of electricity crisis on food prices, the refund on the Road Accident
Fund levy for diesel used in manufacturing process, such as for generators, will be extended to
manufacturers of foodstuffs. This takes effect from 1 April 2023 for two years.
Godongwana said the personal income tax brackets will be fully adjusted for inflation, which
will increase the tax-free threshold from R91 250 to R95 750. Medical tax credits will also be
increased by inflation, to R364 per month for the first two members, and to R246 per month for
additional members.

“The retirement tax table for lump sums withdrawn before retirement, and for lump sums
withdrawn at retirement, will be adjusted upwards to by 10 percent. This means that the tax
free amount that can be withdrawn at retirement increase by R550 000.

“Government proposed an increase in the excise duties on alcohol and tobacco off 4.9 percent,
in line with expected inflation. This means that the duty on a 350ml can of beer increases by 10
cents, a 750ml bottle of wine goes up by 18 cents, a 750ml bottle of spirits will increase by
R3,90, a 23 gram cigar by R5,47, and on a pack of 20 cigarettes, the duty rises 98 cents,” he
said.

On illicit trade, over the past three years, SARS has taken several steps to enhance its
effectiveness in combating illicit trade, particularly tobacco. To this end, SARS has completed 2
316 seizures of cigarettes and tobacco products to the value of R598,8 million.
“The 2023 Budget allocates additional funding totaling R227 billion over the medium term.
These are several priorities that will be funded through this additional money. R66 billion is
allocated to Social Development over the medium term, with R36 billion to fund extension of
the Covid-19 relief of Distress grant until March 31 2024″, said Enock Godongwana.

R30 billion will be used for inflation-linked increases for other social grants. As a results, the Old
Age and Disability grants increase by R90 on 1 April 2023 and a further R10 on 1 October 2023.
The result is a total increase to R2090. The Child Support grant rise from R480 to R510 on 1
October 2023, while Foster Care grant increases from R1070 to R1130 over the same period.
“R23 billion and R22 billion will be allocated to health and basic education respectively, to cover
shortfalls in compensation budgets and to improve services. South Africa is in the forefront to
combat crime and corruption that has been in a rise since the world was visited by the deadly
disaster, Covid-19,” the minister said.

He said government has allocated R14 billion over the medium term to fight crime and
corruption, with the following specifications allocated.
“The South African Police Services is allocated 7.8 billion to appoint 5 000 police trainees per
year, the National Prosecuting Authority received 1.3 billion to support the I implementation of
the recommendations of the State Capture Commission and the Financial Action Task Force, the
Financial Intelligence Centre is allocated an additional R26,5 million to tackle organized and
financial crime,” Godongwana said.

He said the Special Investigating Unit was allocated R100 million to initiate civil litigation in the
special tribunal, following the from proclamations linked to the recommendations of the State
Capture Commission. The Department of Defence is allocated an additional R3.1 billion to
enhance security on South Africa’s borders.