Bryden Morton, Executive Director at 21st Century shares his views…

“The South African economy has remained under pressure since the beginning of the Covid-19 pandemic and has suffered a combination of economic recession and job losses. In response to this, the South African Reserve Bank (SARB) began lowering the repo rate as inflation was at low enough levels that it necessitated an easing of monetary policy to ensure that the inflation rate remained between 3% and 6% (The SARB’s inflation target). This means the cost of credit became cheaper as the inflation rate declined. Subsequently, as the inflation outlook has changed and the expectation is increased levels of inflation in the economy, the SARB will begin to raise the repo rate (as is currently the case). The SARB Monetary Policy Committee expects economic growth in 2022, 2023 and 2024 to be 1.7%, 1.8% and 2%. These reduced levels of economic growth indicate that South Africa expects to have a slow, protracted recovery to the Covid-19 pandemic. Rising inflation expectations, increasing repo rate, reduced growth and a record unemployment rate are the economic realities facing the SA economy presently. This is a difficult economic position to be in that place even further emphasis on this year’s budget speech as more and more services are required with fewer personal income taxpayers in the tax base (due to the approx. 2.1 million jobs lost due to Covid-19 economic consequences).

“Finance Minister, Enoch Godongwana stated in his first South African budget speech presentation, that the economy is able to report better than expected financials relative to what was predicted in the previous budget speech, but it is still not out of trouble. Tax collection is expected to be R182 billion higher than was expected at last year’s budget and is R62 billion ahead of more recent estimates. Higher commodity prices and an eroded tax base in the previous year are two contributors to why the tax collection figures will be higher than expected (R1.55 trillion). The finance minister stressed that this is not an indication that the economy has begun a significant rebound and therefore we should still be very cautious as an economy. Government debt currently sits at R4.3 trillion and is expected to increase to R5.4 trillion in the medium term. This would result in the debt to GDP ratio stabilizing at 75.1% of GDP in 2024/25. This is 3 percentage points lower than what was predicted at the previous budget speech. The annual budget deficit is expected to slow from 5.7% in 2021/22 to 4.2% by 2024/25.

“The finance minister noted that some of the significant risks to the SA economy include slow domestic and global economic growth, increased calls for social expenditure which is not affordable given current resources and the financial distress of state-owned enterprises and municipalities. The minister stated that presently 175 of the 257 municipalities are financially distressed. As per the 2021 MTBPS, government allocated R20.5 billion to meet the 2021 public service wage agreement. The public sector wage bill and its historical growth rates are of concern to the SA economy and government will seek to only marginally increase the public sector wage bill from R665.1 billion in 2021/22 to R702 billion in 2024/25. The finance minister stated that currently, 46% of South Africans receive a social grant of some form. In line with this, SA will spend R3.3 trillion (or approximately 60% of non-interest expenditure) on the social wage for vulnerable and low-income households in the medium term. The social grants will increase as follows:

Old age/disability pension will increase by R90.Foster care/child grant will increase by R20.The social relief grant of R350 per month will be extended for another 12 months.

“Households remain under financial pressure and the presently high fuel prices (approaching $100 a barrel) are adding to this pressure. As a result, both the general fuel levy and the RAF levy have not been increased this financial year. However, the carbon tax associated with petrol will increase to 9 cents per litre and 10 cents per litre for diesel. This is part of South Africa’s plan to ramp up carbon taxes over the next decade. Consumer’s “sin taxes” will increase as follows:

340 ml beer – Increased by 11 cents.750ml wine – Increased by 17 cents.750ml sparkling wine – Increased by 76 cents.750ml spirits – Increased by R4.83.A packet of 20 cigarettes – Increased by R1.03.Sugar (if it can be added to “sin taxes”) – Increased to 2.32 cents per gram.

“Some good news for South Africans is that the personal income tax rebate has increased by 4.5%, affording some tax relief to income taxpayers. Further welcome tax news was that as mentioned in the previous budget speech, the lowering of the SA companies’ tax by 1 percentage point from 28% to 27% will occur at a later date but the intention to roll this out remains the same.

“In summary, what this budget speech is saying to consumers is ‘brace yourself for tough times ahead but we (government) are aware of the problems and are trying to address them’. Whether or not the issues such as arresting the public sector wage bill or increasing social welfare needs can actually be controlled in the manner described remains to be seen. Strong political will is required if government is to navigate the conundrum of increasing expenditure requirements while the economy is facing near static levels of economic growth in the medium term (approximately 1.8% per annum on average). The budget speech in principle was transparent and presented the facts both positive and negative. Unfortunately for consumers, all signs point to a tough few years ahead as South Africa’s economy seeks to rebound.”

Written by:

Bryden Morton, B.Com (Hons) Economics, Executive Director – This email address is being protected from spambots. You need JavaScript enabled to view it.

Chris Blair, B.Sc Chem. Eng., MBA – Leadership & Sustainability,  CEO – This email address is being protected from spambots. You need JavaScript enabled to view it.

About 21st Century:

21st Century, a level 2 BBBEE company, is one of the largest Remuneration and HR consultancies in Africa, with a team of more than 60 skilled specialists, servicing over 1700 clients – including non-profit organisations, unlisted companies, government, parastatals and over two-thirds of the companies listed on the JSE. 21st Century offers bespoke business and strategy planning services, operating model and organisational design, creative reward practice modelling, change, stakeholder and culture management, training courses and comprehensive human capital and talent plans. These are all underpinned by our analytic and survey capability tailored to the African environment. 21st Century continues to offer solutions via a combination of virtual channels and on-site presence. 

21st Century has expanded its services to offer a full turnkey sustainable business and remuneration service. Beyond remuneration and reward consulting, 21st Century offers local analytics for business advantage; remuneration and HR training; change management services; talent and people solutions; and end-to-end organisational design and development. 

Issued By: The Lime Envelope
On Behalf Of: 21st Century
For Media Information: Bronwyn Levy
Telephone: 076 078 1723
E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.