We were expecting an austerity Budget.
Commentators – including Yolandi Esterhuizen, registered tax practitioner and Compliance Manager for Sage Africa & Middle East – predicted increases in VAT, personal income tax, and corporate tax.
These would raise the revenue needed to tackle the growing national debt, which is expected to rise to R3.56 trillion, or 65.6% of GDP, by the end of 2020/21.
But Finance Minister Tito Mboweni’s budget was not what was expected. In fact, it was quite the opposite.
Real personal income tax relief, and a solid commitment to youth job creation and small business development, were some of the unexpected – and welcome – announcements.
While commentators focused on the deficit, the minister focused on the long-term implications if we did not ignite economic growth.
He allocated our limited resources to the things that will have the greatest socio-economic impact, like unemployment and streamlining tax processes, making it easier for small businesses to operate.
For the first time in years, many people felt positive after the Budget Speech. Yes, there were hard decisions. Yes, there’ll be sacrifices, but in the long run, these changes are necessary and will drive growth.
Speaking in a recent podcast, Yolandi Esterhuizen discussed the main themes she took away from this year’s Budget Speech.
Give and take
Minister Mboweni hinted that corporate taxes might be reduced in the coming years, which is great news. But in the same breath, he said that government might limit tax deductions and review business incentives.
While individuals will surely welcome the personal income tax relief, the “usual suspects” were targeted for tax increases.
For our sins, we’ll pay more for alcohol, cigarettes, sugar, and our overuse of plastic bags. Even e-cigarettes, or “vapes”, will be taxed from next year. We’ll also pay a higher fuel price and Road Accident Fund levies.
There are a few reasons to feel positive after this Budget Speech, not only because we have more money to spend.
Minister Mboweni also announced solid plans to fight corruption. People’s hard-earned tax money doesn’t always end up where it should, so efforts to clamp down on abusive behaviour are welcome.
He also announced plans to address youth unemployment, followed shortly by the release of the Draft National Youth Policy, aimed at enabling young South Africans to actively participate and engage in society and the economy.
Policies like this take a lot of work and consideration and don’t emerge overnight.
The fact that it was released so soon after the Budget Speech is proof that the government is walking the talk and has been working in the background on these issues.
This policy is significant within the context of youth unemployment because, when more people are employed, the tax base increases and the budget deficit decreases. Positive future impacts could be even lower personal income tax for everyone.
It remains to be seen how effectively government’s plans to fight corruption and unemployment are executed, but the important thing is that there are plans in place and people will be held accountable for them.
Small business support
There was a lot of focus on small businesses in the Budget Speech. Government clearly wants to make doing business easier for SMEs, as seen in reviews of the preferential small business tax regime, the VAT registration threshold, and turnover tax.
We welcome this relief for small businesses, as they’re the ones keeping the economy alive.
Minister Mboweni spoke about streamlining SARS submission processes, to the point where individuals may never have to submit a tax return again, and the process to submit employer reconciliation declarations will be simplified.
This will free up companies’ time to focus on running and growing their businesses.
To maximise these benefits, businesses should continually look for ways to streamline and improve their own operations.
They shouldn’t fall into the trap of doing things a certain way, because it’s only by changing their ways of working that businesses will thrive.
By always being open to change, constantly innovating, and rethinking your processes, your business has a better chance of thriving in tough economic times.
Change management and continuous learning
A lot of changes were announced in the Budget Speech. Businesses can either view them as opportunities to learn and try something new, or keep doing things the way they always have and risk being left behind.
Hire people who aren’t afraid of change and who appreciate that things change all the time.
Change management is crucial within business, as is developing the mindset that change is okay, it can be positive, and it can make things easier.
In making processes and tasks easier, people may worry about losing their jobs. But, in encouraging a culture of change, businesses can motivate their people to uplift themselves, learn new skills, and keep themselves relevant.
Adopt solutions that reduce the admin burden and allow your team to work anywhere, at any time. Educate yourself on the constantly changing legislative requirements and what your responsibilities are as a business owner.
It’s an exciting time to be a small business owner in South Africa. Be open to change and make 2020 your year of learning.
The Budget Speech has boosted morale in the country. Let’s keep the momentum going.
This article was published in partnership with Sage.