February is South African budget month, and on the 22nd, the Finance Minister will deliver his prognosis on the state of the economy, and how money will be both raised and spent in order to balance the country’s books. In short, we have been spending more money than we have, and it’s time to tighten our belts, yet again.
The finance minister needs to tread the fine line between raising taxes and cutting expenditure without compromising economic growth. It is widely acknowledged that taxes for middle and upper income earners are going to increase, but that we are unlikely to see a change in value added tax (VAT) which currently stands at 14%. It’s going to be a mixed bag for us as individual taxpayers, but fortunately for our commercial customers, corporate income tax is unlikely to increase as we need to attract business investment and growth now more than ever. For the most part, it’s a bitter pill to swallow, but just the medicine we need to nurse our finances and economy back to health.
Encouragingly though, the outlook for economic growth this year is brighter than the tough 2016 we had. Food inflation should begin to moderate due to the good rains we have had and interest rates are unlikely to be hiked any further both this year and next. As confidence begins to rise amongst our business clients, we expect them to start investing more to take advantage of the improving growth outlook. It’s sure to be another roller-coaster year, but with more ups than downs this time around