Latest news with #Medium-TermFramework
IOL News
21-05-2025
- Business
- IOL News
Eina! Motorists to feel the pinch as Finance Minister notes increase in fuel levy
Finance Minister Enoch Godongwana Image: GCIS/Phando Jikelo South Africa's National Budget, which was finally tabled on Wednesday after three previous attempts, is not one in which government seeks to reduce expenditure, Finance Minister Enoch Godongwana said. However, in seeking to increase revenue for the state's coffers, the budget proposes an inflation-linked increase to the general fuel levy, said Godongwana. He added that this was 'the only new tax proposal that I am announcing' and would be the first fuel levy increase in three years. Both Old Mutual chief economist Johann Els and Investec chief economist Annabel Bishop expected such an increase, although Bishop had also expected that the duties on tobacco and alcohol would increase. However, said the Minister, this will not be enough to close the revenue gap. Subsequent budgets will have to find additional revenue sources, said Godongwana. Before tabling the Budget, Godongwana said that the votes on it needed to happen before the end of July as Departments were running out of money. The Budget was, for the first time in nine years, not physically attended by President Cyril Ramaphosa who joined live from US, where it was 5am in Washington. 'This is not an austerity budget,' said Godongwana. He noted that, instead of cutting back severely on expenditure, it increases non-interest expenditure by an average of 5.4% over three years. In real terms, this is 0.8% growth, the Minister said. South Africa's two previous Budget attempts failed to gain approval because of proposed VAT hikes, and markets had been concerned over DA threats to leave the multi-party government. Since then, Cabinet has approved the proposed framework. Economists had called for expenses to be cut as the removal of the March proposal of 0.5 percentage point VAT hike meant that government would have a R75 billion deficit in revenue. As a result of the removal of the proposed VAT increase, 'the expansion of the zero-rated basket, which was included to cushion poorer households from the VAT rate increase, falls away,' said Godongwana. In addition, money flowing in from tax has now been revised down by R61.9 billion over the next three years of the Medium-Term Framework. The National Treasury has proposed allocating an additional R7.5bn over the next three years to increase the effectiveness of the South African Revenue Service in collecting more revenue. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ On Wednesday, Godongwana said the National Budget was a redistributive budget.' It directs 61 cents of every rand of consolidated, non-interest expenditure towards the social wage. This is money that will be spent to fund free basic services like electricity, water, education, healthcare, affordable housing, as well as social grants for those in need,' he said. This budget invests over R1 trillion in critical infrastructure to lift economic growth prospects and improve access to basic services, Godongwana said. He added that this is done without compromising the fiscal strategy of sustainable public finances. However, government has achieved its balancing act by reducing additional spending over the medium term by R68bn. 'Simply put, this means baseline allocations across all spheres of government remain largely unchanged. Instead, the size of the proposed increases to allocations is reduced, in line with what we can afford,' said Godongwana. Economists had been concerned about frontline investment being cut, such as additional teachers and nurses. Godongwana added that the government would continue to pay large amounts to service debt, which would amount to more than R1.3 trillion over the next three years. 'Put differently, this means in 2025/26 alone we are spending around R1.2 billion per day to service our debt,' he said. IOL
The Citizen
02-05-2025
- Business
- The Citizen
Weekly economic wrap: Rand stabilises while gold loses shine
The rand looked a lot better this week as China seems more likely to talk to the US about tariffs, but it cost gold a few dollars in price. It was a quiet week on the domestic economic front, with two public holidays and few data releases showing the South African economy's performance. The good news is that the rand was more stable this week, although gold lost a tiny bit of its shine after its record-highs of the previous week. Isaac Matshego and Busisiwe Nkonki, economists at the Nedbank Group Economic Unit, say the rand is benefiting from improved risk aversion as fears about the US-China trade war ease. China's commerce ministry was quoted as saying that trade talks with the US are imminent after the Trump administration expressed its readiness to start negotiations on tariffs. In South Africa, Finance Minister Enoch Godongwana announced that a revised budget for the current financial year and estimates for the Medium-Term Framework for the current and the next financial year will be tabled on 21 May. ALSO READ: Godongwana consents to court order against VAT increase Scrapping of VAT increase helped the rand Matshego and Nkonki say the announcement about scrapping the VAT rate increase to 15.5% from 15% has somewhat eased fears about the stability of the government of national unity (GNU), which helped the rand. The rand traded at R18.36/$ on Friday afternoon, firming from R18.59 on 30 April to its strongest level since 1 April. In the local equity market, the JSE Alsi is marginally higher despite a slump in basic materials, which was dragged lower primarily by the softer gold price. Gold was trading around 3,255.76 on Friday afternoon, its lowest level since 15 April, as global risk aversion eased. Platinum-group metal prices rebounded further, albeit marginally, the Nedbank economists noted. Brent crude oil fell to $62.21 a barrel, its lowest level since April 2021, after reports suggested that OPEC+ will announce further output expansion effective June. ALSO READ: Manufacturing PMI for April shows deteriorating SA economy Credit growth slowed in March Growth in private sector credit extension slowed further in March to 3.5% from 3.7% in February. Matshego and Nkonki say the moderation can be attributed to the bills and investments category, which contracted by 6.3%. Growth in loans and advances, which excludes bills and investments, increased to 4.3% from 3.9%, with credit in both the household and corporate sectors increasing. Household loans improved marginally to 2.9% from 2.7%, while growth in home loans was up slightly (2.3% from 2.1%) and overdrafts and personal loans continued to contract but at a softer pace. Instalment sales and leasing finance maintained its growth rate of 6.2%, while credit card usage eased to its lowest rate since January 2022, when it grew by 7.6%. Corporate credit growth increased to 5.6% from 5.1%, supported by a notable increment in overdrafts. ALSO READ: What does lowest inflation in 5 years mean for repo rate? Lower inflation and improved growth should bolster consumer confidence Overdrafts jumped to 10.3% from 4.9% in February, while commercial mortgages, instalment sales and leasing finance also edged higher. However, credit card usage by companies dropped noticeably to 2.5% from 11.1% and general loans slowed by a smaller margin, easing to 4.3% from 4.8%. Matshego and Nkonki say on the household front, lower inflation and improved growth and employment outlook should bolster consumer confidence, allow lenders to ease credit standards and therefore encourage growth in the coming months. 'For corporates, credit growth is set to remain modest amid spare capacity and heightened levels of uncertainty. However, conditions will likely recover more meaningfully later in the year as better growth outcomes boost confidence and bolster private-sector investment.' ALSO READ: Trump tariffs created unprecedented uncertainty — trade expert Trade balance: Exports expanding faster than imports According to Sars, the trade balance widened to a surplus of R24.8 billion in March from R20 billion in February, with exports leading the charge, increasing by 5.7% compared to February, although slower than the 9.8% in February, but still expanding faster than imports. The main positive contributors were machinery and electronics, which increased by 21%. Matshego and Nkonki say this suggests higher shipments to the US ahead of the Trump administration's reciprocal tariffs. Mineral products also added to the upside, up by 18%, while the unclassified goods subcategory made a surprising contribution, increasing by 467%. While a substantial increase, Matshego and Nkonki say the contribution to the headline figure is negligible, given that the category accounts for much less than 1% of the country's exports. The main export destinations during the month were China (10.2%), Germany (7.7%), the US (5.7%), Mozambique (5.6%) and India (5.3%). ALSO READ: Weekly economic wrap: Policy reversals and lowest inflation in 5 years Rebound in imports, but global trade tensions loom Imports rebounded by 3.2% in March after a 13.5% contraction in February. The recovery was driven by a 156% increase in animal and vegetable fats, with further support emanating from purchases of vehicles and transport equipment (28%), original equipment components (9%) and mineral products (7%). The main import destinations for the month were China (18.8%), India (7.9%), the US (7.2%), Germany (6.6%) and Thailand (3.7%). Over the year, exports recovered by 6.3% from 1.2%. In contrast, imports remained in contractionary territory for a second consecutive month. Matshego and Nkonki point out that the trade outlook has become increasingly uncertain due to ongoing global trade tensions. 'Imports may continue to increase as lower inflation and higher real incomes bolster import demand. The expected ongoing recovery in fixed investment will also provide an additional boost.' They note that the Trump administration delayed the tariffs imposed on most countries in late March for 90 days, providing some short-term relief for the US's trade partners, except China. However, Matshego and Nkonki say, South African exports will likely weaken this year given the gloomier global growth prospects, particularly from the country's key trade partners. 'The IMF expects global growth to moderate to 2.8% in 2025, down notably from the 3.3% estimated in the January World Economic Outlook Update.'
