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Personal finance & youth employment experts share comment on National Budget 2024

22 February 2024 Consult by Momentum

Jurgen Eckmann, Wealth Manager at Consult by Momentum.

As expected, the Budget contained a great deal on where the government plans on spending (no doubt given that it’s election year), but sadly there wasn’t enough focus on that which will stimulate or contribute to the economy’s growth. Perhaps this is the reality of what has been dubbed a ‘budget of austerity’, but if we are to get out of the gaping deficit we’re currently in, we need to be cutting unnecessary expenditure and generating more revenue.

The announcement that multinationals with an annual €750 million will be subject to an effective tax rate of at least 15%, regardless of where their profits are generated, is a double-edged sword. This doesn’t encourage operations (and thus job creation in SA), and almost seems counterintuitive to the reduction of corporate income tax announced in a previous budget, intended to stimulate business.

Also remember that companies are concerned with their bottom line; their net profits. Any increase in costs they bear is generally passed on to their customers, meaning that we will ultimately pay the price somewhere down the line.

The personal income tax brackets were not adjusted, which is welcome, but consumers who ultimately get their annual increase and move into a higher tax bracket will ultimately have less in their pockets.

Sin taxes are an ‘easy’ or ‘lazy’ way of generating revenue because we, as South Africans, love our vices. These seldom act as a deterrent; consumers will continue to consume and pay the higher prices. Something else to consider is that retailers often see these sin tax increases as an opportunity to hike up their own prices, meaning that we ultimately pay an even higher price for our sins.

The Gold & Foreign Exchange Contingency Reserve Account Adjustment Bill (GFECRA)
While the speech was thin on detail, the announcement of the GFECRA Adjustment Bill is potentially another double-edged sword. Not only are we tapping into money that is generated as a direct result of our rand depreciating; but we are also spending this money to make ends meet, not to invest in the growth of our economy. It can be likened to dipping into your retirement savings to pay for a holiday before you retire! Helpful in the short term but with severe long-term implications.

Nkosinathi Mahlangu, Youth Employment Portfolio Head at Momentum Metropolitan

Youth unemployment
Looking at the dire unemployment stats that were released yesterday, I was hoping for Budget to zoom in on youth unemployment. Not much was mentioned in so far as young people were concerned, and entrepreneurship was also hardly touched on.

The Public Procurement Bill
The Minister’s announcement on the Public Procurement Bill – with an emphasis on small enterprises owned by black people, specifically black women, youth, and those with disabilities – was welcome, but again, was thin on details. I would like more specifics on which sectors this will focus on, but I believe it’s a move in the right direction.

Social grants
The Minister also mentioned that there was less tax revenue collected than was projected, but in the next breath mentioned an increase in grants. While people need to live, the concern is that this will not be sustainable in the long term – we simply don’t have the resources.

Health and Education
Budget allocation to these critical areas is welcome. However, we must devote effort to ensuring that these sectors support the influx of qualified young people and that we are dedicating sufficient resources to developing our own skillsets locally.

Tshego Bokaba, CSI Manager at Momentum Metropolitan

The Minister announced that R1,6bn rising to R2bn would be dedicated to the early childhood development grant, while the protection of the school nutrition programme was maintained. This is vital and very welcome, as we know the role that nutrition plays in preventing childhood stunting and health-related learning challenges. We also need to ensure that the funds allocated to education will actively deal with the real skills shortages we face – and as early as primary education level – so that we are developing young people who are adequately equipped to take on the roles we need.

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