Money and Markets

Everything you need to know about Budget 2020 – in 18 graphs

Business Insider SA
Finance minister Tito Mboweni prior to his 2019 bu
Finance minister Tito Mboweni prior to his 2019 budget speech in Parliament. (Photo by Gallo Images / Brenton Geach)
  • Finance minister Tito Mboweni's national budget contained a number of surprises, including income tax relief of around R2 billion.
  • But the budget documents also make for depressing reading when it comes to government's dire debt problem
  • Business Insider SA rounded up some of the most important charts that Treasury prepared, which between them tell you everything you need to know about Budget 2020.
  • For more stories, go to Business Insider SA.

Finance Minister Tito Mboweni's national budget proposes sharp cuts to the civil servant wage bill, while taxpayers emerged largely unscathed.  

Here are some of the key charts from Budget 2020 that paint a picture about what lies ahead in this financial year:

The economy will grow by less than 1% this year

Government expects that the economy will only grow by 0.9% this year – and that's with the assumption that exports will grow by 2.3% – while world trade is being ravaged by the novel coronavirus behind Covid-19:

Source: Treasury

There is a distinct lack of investment in the economy:

Source: Treasury

Read: Here are the biggest bombshells in the Budget – including taxpayers getting R2 billion in tax relief

SA's government debt keeps on growing

The total government debt burden now equals almost 66% of South Africa’s total economy – and repayments on this debt is growing by more than 12% a year.

Source: Treasury

The amount government is spending on repaying its debts is now rising at a much faster rate than spending on anything else: 

Source: Treasury

Loan repayments will represent more than 16% of total spending in the next year:

Source: Treasury

Government's debt problem has a lot to do with the spiralling bailouts out of state-owned enterprises:

Source: Treasury

Foreigners still love South African government bonds

Despite South Africa's growing debt burden and the threat of Moody's downgrading domestic bonds to "junk" status, foreigners increased their investments in South African government bonds by R95 billion last year.

In 2018, this increase was only R8 billion.

International investors now hold 37% of South African government bonds. This shows "global investors remain positive about South African assets despite concern about sovereign credit risk," Treasury says.

Source: Treasury

Government wants to slash the civil servant wage bill by R160 billion in three years

Instead of hiking taxes, government wants to slash the state wage bill.

"Civil servants’ salaries have grown by about 40% in real terms over the past 12 years, without equivalent increases in productivity,” Treasury notes. 

Civil servant salaries now represent more than a third of government’s total spending:

Source: Treasury

Education will still get the biggest budget allocation

Source: Treasury

The defence budget has been cut by 0.2%, while police will be getting 2.8% more and the courts and prisons 3.5%. With a budget of R106 billion, policing is now getting more than defence, law, and prisons combined.

Tax relief for income tax payers

Income tax payers will collectively pay R2 billion less in tax after adjustments to the tax brackets. Someone earning R460,000 a year will see their taxes reduced by nearly R3,400 over the next year. 

It would be foolhardy to increase tax in this environment, finance minister Tito Mboweni said at a press briefing before the Budget speech.

Source: Treasury

Also, the tax rate in South Africa is high compared to some of its peers:

Source: Treasury

Welfare grants will be hiked in line with inflation

Source: Treasury

The child grant will be increased slightly higher than other types of social grants. The total number of welfare beneficiaries is expected to increase by almost 1 million, to approximately 19 million people, by 2022/23.

You will pay almost R2 a litre more for petrol than last year

The fuel levy has been increased by 16c, and the levy for the Road Accident Fund (RAF) rose by 9c. The fund is completely underwater, and will face a total deficit of R593 billion by 2022/23, and it is now government’s biggest liability after Eskom. 

Read: You’ll soon pay 25c more tax per litre of fuel – here’s how fuel tax has increased from 2008

The total tax on 93 octane petrol in Gauteng will be increased to R5.88 a litre, and to R5.74 on diesel. This means that tax is now 37% of the petrol price and 39% of the diesel price. 

Source: Treasury

Read: There’s a plan for etolls, but Treasury says it can’t release it

SA's corporate tax rate is due to come down – eventually

Source National Treasury

South Africa’s corporate tax rate has remained unchanged at 28% for more than a decade – while many other countries have lowered theirs. Treasury now also wants to lower the company tax rate, which it believes will discourage companies from shifting their operations around to get a better tax rate elsewhere in the world.

It is not clear when that will happen.

Sparkling wine and cigars have been slapped with the biggest tax hikes, but sorghum beer is spared

The excise duty on cigars will go up by a whopping 7.5% this year, and tax on sparkling wine will rise by 6%, while the rest of sin tax hikes are in line with inflation. But traditional African beer won't see a sin tax hike.

Source: Treasury

Read: More than 50% of your cigarette price now goes to tax, national treasury says – and more than 20% of liquor

Transfer duty hikes

Transfer duties have been increased...

Source: Treasury

... but the threshold for paying transfer duty has been hiked from R900,000 to properties of R1 million. According to Pam Golding, this is particularly good news for first-time buyers. 

The average price paid for a home by a first-time buyer broke the R1 million barrier for the first time ever at the beginning of the year in South Africa – at R1,001,275 in January 2020:

Source: Pam Golding

The markets loved the Budget

After hitting R15.33/$ early on Wednesday, the rand rallied back to below R15.10 following the Budget:

Rand/dollar. Source: XE

The currency large gave up some of its gains, dragged lower by global uncertainty amid the coronavirus.

But banks and retailers jumped following the news that income tax and VAT won't be hiked. Shoprite's share price rallied by almost 10%, and there was also buying in Truworths (+9%), Standard Bank (+8%), Absa (+7%) and Discovery (+7%).

This Budget speech actually struck a delicate balance by being both bond and equity friendly, says Chantal Marx, FNB Wealth and Investments.

"Generally what would happen is an equity friendly budget would not be a bond friendly budget. Equity friendly is usually when expenditures are up and taxes are down which would mean that people have more money in their pockets and this is usually good for markets, particularly for the JSE and South African Inc Stocks. A bond friendly budget usually has a decline in expenditure and higher taxes which means more money is available to bond holders and other people who are owed money by government from a broader debt perspective.

"What happened here is that we saw the expenditure being cut to being more bond friendly, because there is more money available in the fiscus to pay debt holders but you also had a stay of execution on tax increases. That was perceived as equity friendly and the reason is that there was a lot of talk in the market over the last couple of weeks of increases in VAT, Wealth Tax, and a new 48% tax bracket and the prescribed assets but none of it materialised.

"What surprised us though is that there was an adjustments on bracket increases - which means if you were earning more money or you had an increase, you would be pushed into a higher inflation and higher tax bracket which means you would compensated and we thought that government would take that as a easy way of raising revenue. So because of the fact that consumers have more money in their pocket or what was usually expected for the next year, the equity market was impacted positively and stocks rallied and banks were up at almost around 4% just after the Budget Speech and retailers also did well," Marx said.

Read: You’ll soon pay 13c more for every plastic bag – with proposals to tax all single-use plastic and straws

Compiled by Helena Wasserman

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