SOUTH AFRICA – The Treasury has announced tax increases and increased spending on social grants to fund its 2024/25 budget amidst a weak economy. Finance Minister Enoch Godongwana stated that the budget includes hikes in income taxes and excise duties on tobacco and alcohol products.
“The weak performance of our economy has resulted in a sharp deterioration in tax revenue collection for 2023/24,” the minister said during the budget speech on Wednesday.
“This budget contains tax measures that will raise R15 billion in 2024/25 to alleviate immediate fiscal pressure and support faster debt stabilization.”
Tax Hike Breakdown:
Income taxes: Specific details not yet disclosed.
Excise duties:
Alcohol: Increased by 6.7% to 7.2%.
Tobacco: 4.7% increase for cigarettes and tobacco, 8.2% for pipe tobacco and cigars.
Social Grant Increases:
Old age, war veterans, disability, and care dependency grants: R100 increase, phased in as R90 from April and R10 from October. The current old age grant stands at R2,090 per month for those between the ages of 60 and 74, and R2,110 for those 75 and older.
Foster care grant: R50 increase.
Child support grant: R20 increase.
Employment Initiatives:
R61.4 billion allocated over the medium term.
R7.4 billion earmarked for the Presidential Employment Initiative.
Security Focus:
R765 billion allocated to the peace and security cluster.
10,000 new police recruits to be trained.
Funding allocated for military deployments in Mozambique and the DRC.
Minister Godongwana criticized what he termed “abnormal pricing” by suppliers to government departments, expressing dissatisfaction with inflated procurement costs. He noted a significant disparity between government charges and market prices, stating, “Too often, there is a substantial disparity between the prices government is being charged and the prevailing market prices.” For example, ICT hardware is bought at between 1.2 and 2 times the market price. He emphasized the need for lower charges, given the government’s bulk purchases, asserting, “We should be paying less and leveraging our buying power to get more value for our money.”
In the recent past, Eskom revealed having a similar challenge. In 2021, Eskom suspended its chief procurement officer, Solly Tshitangano, over allegations of excessive spending. This action came after then CEO Andre de Ruyter’s testimony to Parliament’s Standing Committee on Public Accounts (SCOPA), revealing Eskom’s payment of inflated prices for goods from suppliers. According to de Ruyter’s 53-page affidavit, Eskom paid R26 for a single one-ply toilet paper roll, sold at R3.99, and R51 for a black refuse bag, sold at R29.99. Additionally, Eskom was charged R21.00 for a litre of milk, sold at R12.45.
Godongwana affirmed the importance of efficiency, transparency, and competition, stating, “These principles are not incompatible with transformation.”
