Alameen Templeton
1 minute read
25 Feb 2015
1:45 pm

Budget expected to hit consumers (video)

Alameen Templeton

Finance Minister Nhlanhla Nene is due to deliver a budget today that many say will contain bad news for consumers.

FILE PICTURE: The Minister of Finance Nhlanhla Nene. (Photo by Gallo Images / The Times / Esa Alexander)

Commentators predict an increase in the fuel levy, increased income tax, a VAT hike and possibly disappointing social grant increases to be unveiled. Government has a deficit of about R12 billion.

Commentators also believe the government will take advantage of falling oil prices to increase the fuel levy. A fuel levy will be a difficult tax-solution to resist – the state could raise an additional R25 billion just by adding R1 per litre to the fuel price.

Economist Mike Schüssler, founder of economists.co.za, believed motorists would still be better off than last year. In September, the petrol price skyrocketed beyond R14 per litre. He expected fuel prices to remain under that high level for the rest of this year.

Dawie Roodt, chief economist at the Efficient Group, expected increased levies on petrol by between R1 and R1.50 per litre.

President of the South African Chamber of Commerce and Industry, Vusi Khumalo said he was “eager to hear” how the government’s “Back to Basics” programme would improve local service delivery, and the funding model government would propose for its National Health Insurance.

Izak Odendaal, Investment Strategist at Old Mutual Wealth, believed tax increases were “inevitable”. He was concerned about the sustainability of government finances, especially with Eskom, SAA and Sanral “in dire financial predicaments”.

He foresaw income tax increases, particularly in the top tax brackets. However, government would still either have to raise VAT or decrease expenditure.

Government needed to find a way of managing national finances that did not require either drastic budget cuts or tax increases.

South Africa’s budget deficit was 4% of GDP. “The gross financing requirement looks perfectly manageable, provided the deficit reduces as projected,” he said. – alameent@citizen.co.za