When Finance Minister Enoch Godongwana presented his inaugural Budget for 2022 on Wednesday, 23 February, he seemed to be walking the proverbial tightrope.
He was expected to toe the fiscal line set by the government – which he had re-emphasised in his October medium-term budget speech. In addition, he needed to outline investment-friendly policies to stimulate sustainable economic growth and 'unleash the economy' – as indicated by President Cyril Ramaphosa in his recent State of the Nation Address.
All in all, Godongwana did quite well, and South Africans can generally be satisfied with their new Minister of finance, who took over the reins from Tito Mboweni late last year. Admittedly, he was aided by the R182 bn windfall in additional revenue due to the mining industry's above-expectations performance.
The Budget emphasised a much-needed focus on reducing the continual demands for bail-outs from State Owned Enterprises (SOEs). The Minister indicated that some SOEs would be retained, whereas others would be rationalised or consolidated. He also provided clear deadlines for the ongoing reform of South Africa's electricity sector to cut donwn reliance on Eskom and create a reliable energy supply.
Industry views
Pam Golding Property group
Dr Andrew Golding, chief executive of the Pam Golding Property group, says this was a carefully balanced budget.
“It also acknowledged that an increased tax burden would threaten economic recovery while using the tax revenue windfall to provide additional support to SMEs and vulnerable households struggling in the wake of the Covid-19 pandemic and stabilise debt," says Golding.
“With a 4.5% adjustment in the personal income tax brackets to combat fiscal drag and no increase in the general fuel levy and Road Accident Fund levy, Minister Gondongwana’s maiden budget speech delivered good news for consumers.
“From a property market perspective, confidence and positive sentiment are critical to investment and market activity – locally and internationally. However, we would have liked to see the threshold for transfer duty exemption raised above the current R1 million. This is particularly significant as the average price paid by first time home buyers is R1.14 million, according to ooba’s January 2022 statistics.”
Rawson Property Group
Tony Clarke, managing director of Rawson Property Group, says that Finance Minister Godongwana's Budget speech shows a clear emphasis on economic revival, which will hopefully settle some concerns from investors over South Africa’s ability to take its economic outlook seriously.
“One of the most encouraging elements of the speech was the focus on keeping money in the pockets of South Africans and restoring livelihoods. Substantial tax hikes have thankfully been avoided, which allows for more disposable income and will make it easier for potential buyers to afford the homes they want and qualify for the home loans they need.
“Stable taxes will add impetus to a market that is already benefiting from relatively mild-interest rates and competition among the banks for new home loan business.”
Chas Everitt International property group
Berry Everitt, chief executive of the Chas Everitt International property group, is encouraged by the Minister's frank acknowledgement of the hardships that so many households are facing in the wake of the Covid-19 pandemic and the Budget provisions made to try to 'keep money in the pockets of South Africans'.
“These include the announced personal income tax relief, the remarkable decision not to increase the fuel levy and the reduction in the corporate tax rate. This will especially benefit the individuals and small businesses that have borne the brunt of the economic destruction caused by the pandemic.
“From a property point of view specifically, we are also pleased with Treasury’s plan to facilitate a government loan guarantee scheme that will enable small business owners to gain better access to bank funding, and with the increased allocations to the presidential job creation programmes, specific infrastructure repair and development plans and the retention of teachers,
“We hope all these measures will help in the near to medium-term to bring about a significant increase in employment, which will be key to maintaining a healthy property market in SA.”
RealNet estate agency group
Gerhard Kotze, managing director of the RealNet estate agency group, says that probably the best news to come out of the Budget is that the government will no longer be providing bail-outs to the SOEs that have been hollowed out by corruption, incompetence and financial mismanagement.
“These organisations have been a massive drain on the economy - and on the pockets of ordinary South Africans - for far too long, and we believe the ‘tough love’ now proposed by the Finance Minister will give public confidence a huge boost.
“This positive sentiment should be further buoyed by the news that there will be no fuel tax increase in April, that most employees will have to pay less tax in the coming year and that the unemployed will continue to receive the social distress grant.
"This will be good for the residential property market. The commercial property market will no doubt also be positively affected by the decision to lower the corporate tax rate from 28% to 27% and by the government's plans to underwrite small business loans and actively promote more public-private partnerships to speed up the urgent repair and development of SA’s road, rail and water networks.
“However, we all know that the real key to the future of the property market in SA is the systematic reduction of unemployment, and that can only be achieved in an environment of strong economic growth. So, it is disappointing that GDP is only expected to grow by 2% or less for each of the next three years.
“Government will simply have to do more to encourage - and enable - the local and foreign investment in SA that is needed to up this growth rate and speed up job creation,” says Kotze.
Lew Geffen Sotheby’s International Realty
Yael Geffen, chief executive of Lew Geffen Sotheby’s International Realty, says this year’s Budget speech is the first in years to give South Africans tangible confidence that economic recovery is possible.
“To have a R182 billion tax overrun in the kitty is a long way from getting us out of the woods, but it eases the crushing burden that every South African business and individual has felt in recent years.
“I don’t recall another budget in which the tax burden on citizens wasn’t almost universally increased, but this year nothing went up other than carbon tax and so-called ‘sin taxes’.
"In fact, inflation-aligned personal tax bracket and rebate adjustments, as well as medical tax credit increases, will result in more money in people's pockets. This is excellent news for home owners making mortgage payments and people saving to buy their first homes."
Geffen says the Eskom and general SOE situation is still highly worrying and a massive challenge to macro-economic growth, as is the State's debt burden of R4.3 trillion.
“One year of good revenue collection across a broader tax base shows the government is making an effort to put its house in order and it’s a positive start for which it should be commended. But the congratulations should only come when it has done this 10 years in a row. Then we’ll know the country’s leadership is serious about state prosperity rather than state theft.”
High Street Auctions
Joff van Reenen, real estate lead auctioneer and High Street Auctions director, says the finance minister’s anxiety in his 2022 Budget Speech about South Africa’s debt burden of R4.3 trillion is right on the money.
"Business confidence in South Africa and abroad will no doubt be buoyed by the news that our revenue collection overrun of R182 bn is in part going towards stabilising the country's debt position. Therefore allowing citizens to reduce their debt borrowing for the first time in seven years.
"That abundance also allowed for a feast of 'good news' tax announcements for both households and corporates – everything from no rise in personal tax rates to no fuel levy increase. In fact, the 1% drop in corporate tax mentioned last year will definitely be implemented. All in all, South Africans are looking at more than R5.2 bn in tax relief to help support the economic recovery, according to the Minister.
“That said, though, until South Africa is spending significantly less than the current 20c of every rand of government revenue to service its ever-growing multi-trillion-rand debt burden, we'll have odd days of sunshine, but we won't have sustainable and equitable economic growth.
“Property investment in South Africa is currently bullish with record sales last year in several areas. But to maintain this in the long term, the country needs economic development and a government that shows strong fiscal leadership. This Budget speech is a step in the right direction, but it remains to be seen whether the government will be able to walk its talk."
Read More: Budget 2022: Did it move you?
