In less than 60 minutes Minister Mboweni presented his maiden budget in Parliament today.
In a national election year, off the back of poor economic growth and dwindling confidence, it had to be a budget targeting renewed optimism for us at home and the broader investment community. As he started talking, the rand weakened but by the end of the day, had strengthened against all major currencies; perhaps a glimmer of hope?
Minister Mboweni (Picture: Ruvan Boshoff)
But what did Minister Mboweni have to say that will affect you? Not much actually; this budget was more about good housekeeping (and gardening) than anything else.
There have been small changes to personal tax thresholds and rebates – this is the first time since the early 90s that there are no inflationary adjustments to personal income tax rates. What this means is that inflation-linked salary increases could attract more tax, especially at higher levels.
Tax rebates have increased to R14,220 from R14,067. This is an immaterial change with less than marginal effect.
There were no changes to retirement funds, trust tax rates, donations tax and estate duty. Capital Gains Tax remains the same as do offshore investment allowances.
With no changes to the retirement savings deduction, individual investors can continue to invest 27.5% of taxable income into all retirement funds including provident funds, with a maximum of R350,000 per annum. Tax-free savings account limits remain at R33,000 per annum, with a R500,000 life time contribution. You have until the end of February to maximise your tax efficiency.
At the corporate level, company tax remains at 28%.
As in every year, your pocket will be hit a little harder by the so-called sin taxes.
There will be an increase in the fuel levy - an extra 29c on petrol and 30c on diesel. Once in place, the fuel taxes will constitute 41% of the total cost per litre. The knock-on effect will make us all grumpier.
At the macro level, the budget proves to be hopeful yet firm, especially the minister’s stance toward state owned enterprises and his core focus on Eskom’s failure. The introduction of a chief reconfiguration officer to oversee SOEs who rely on government for funding should curb ever-increasing debt.
We were heartened to see that Minister Mboweni took our advice on cutting the public sector wage bill by reducing national and provincial compensation budgets by R27-billion over the next three years.
The freeze on performance bonuses and salary increases for certain state employees is sensible.
In a nutshell, we support the minister’s prudent approach to this budget. He said it himself; “It will not be easy. There are no quick fixes. But our nation is ready for renewal.”
Our advice for now is to wait and see how this fiscal plan plays out. We always advocate a diversified investment philosophy. Hope for the best, plan for every eventuality. Don’t make any hasty decisions before speaking to your NFB Private Wealth Manager first!
THE NUMBERS IN PICTURES
the complete 2019 Budget Speech
Synopsis written in conjunction with NFB Private Wealth Managers Jaco Van Zyl and