In his Budget Speech on 22 February, South Africa’s Finance Minister Enoch Godongwana emphasised that the 2023 Budget is being tabled in a difficult domestic and global economic environment.
“The global recovery is slowing. Domestically, load-shedding has become more persistent and prolonged, impacting service delivery and threatening the survival of many businesses.
“This is compounded by disruptions to freight and logistics networks. Households are under pressure from the rising cost of living, and unemployment remains stubbornly high,” he said.
“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 macro-economic 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.
- 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.”
Positives
From a property perspective, there were quite a number of positives in the 2023 Budget speech. These include:
- The raised threshold for transfer duty on property from R1 million to R1.1 m.
- Incentives for households and businesses to invest in renewable energy.
- The extension of the diesel subsidy for generator operation to food manufacturers. Which should also help to keep food price increases down.
- Increased spending on infrastructure and the implementation of many large projects that will provide many jobs and improve the living conditions in many towns and cities, making them more attractive to residential and corporate property investors.
- Increased spending on the police service and anti-corruption measures. This will help over time to reduce SA's very high crime rate and the effect that it has on consumer confidence and willingness to invest in local property.
- The plan to restructure and rationalise the public service, which Treasury estimates will save taxpayers some R27bn over the next three years.
Negatives
Some negative aspects of the Budget that could limit property demand and prices in the short to medium term include:
- Government's decision to take on more than half of Eskom's current debt at a cost of R254 billion to SA taxpayers. This money could otherwise have been spent on economic expansion and desperately needed job creation. At present, GDP growth is expected to reach 0.9% this year and average 1.4% over the next three years.
- The projected increase in government's total debt is from around R4.7 trillion to around R5.8 trillion over the next three years. This makes South Africa more vulnerable to external and internal economic shocks and, therefore, less attractive to investors.
Extract from the Private Property Article: Writer : Sarah-Jane Meyer • Feb 23, 2023