You know how tricky it can be to balance your personal budget, right? Now imagine having to budget for a whole country – and then presenting it in public. That’s what Minister Malusi Gigaba and his team at National Treasury have to do. On Wednesday, 21 February, the Minister delivered his budget speech in Parliament. Here’s what it means to you and me.
Balancing South Africa’s budget is a complex task. Vast amounts of money are involved, with many people needing to pay and many people and organisations needing to be paid.
Let’s look at a few questions and answers to better understand the national budget.
Where does the government get the money it spends?
From every person living in this country, doing business here, or visiting it as a tourist. The income tax deducted from your pay and other earnings, the VAT you pay when you shop, the tax the company you work for pays – all of that goes into the government’s account.
Where does the government spend the money it gets?
The budget is allocated to the various government departments that have to spend that money on citizens and infrastructure to support and uplift the country through various projects and initiatives.
It also has to ensure that the debt we owe to other countries, institutions and individuals who have invested in or funded the country is repaid. This debt burden is significant and consumes a significant chunk of the budget.
The Minister of Finance, through National Treasury, is also responsible for ensuring that the money is spent appropriately and is not wasted. This is also our responsibility and is the reason why all of us have to be active citizens. The government spends the money we work hard to earn, and we have to hold it to account and not condone wasteful expenditure and/or corruption.
What does the 2018 national budget mean for you and me?
Three measures are going to hit our pockets hard:
- Firstly, the VAT rate will increase from 14% to 15% on 1 April this year. But the basket of zero-rated food remains to protect poor households.
- Secondly, we are going to pay 52 cents more for every litre of fuel that goes into our own vehicles or the taxis and buses we use, regardless of what the fuel price is. This will probably increase the cost of public transport.
- And if you smoke and/or drink alcohol, you are going to pay between 6% and 10% more for your “sins”.
But there is also good news:
- On the upside, Minister Gigaba announced some relief for the poor and the working class in the form of below inflation increase in personal income tax.
- There will also be an above average increase in social grants.
- In terms of higher education, R57 billion has been budgeted in the medium term for free tertiary fees for students from households earning below R350 000 a year.
- Importantly, R6 billion will go towards drought relief and the development of public infrastructure to help conserve and manage our country’s water resources better.
- More money was allocated for the fight against HIV/Aids, and to start implementing National Health Insurance (NHI), to provide universal access to quality health care.
What can you do about the budget?
Obviously, you can’t refuse to pay income tax and VAT, but you do have some choice in other areas.
For instance, if you drink and smoke less – or even stop altogether – the increase in the sin taxes won’t affect you. Read more about what your bad habits really cost you. You’ll also save a whole lot of money and your health will benefit, which could save you even more cash on doctors’ visits and medicine.
More expensive fuel is more difficult to manage, but you could try to start or join a lift club or use public transport to get to and from work (if you don’t already). You can also cut down on non-essential travel. If you have your own vehicle, make sure it is completely roadworthy and that its engine is serviced regularly to be as fuel efficient as possible. You can also adapt your driving habits to improve your vehicle’s fuel consumption.
The best thing you can do is to focus on your personal finances, which is within your control. Draw up a budget, keep a close eye on your expenses, and save as much as you can.