South Africa’s Minister of Finance Malusi Gigaba has delivered the medium-term budget policy statement on 25 October 2017, and there is a lot of content for local employers to consider.
As the leader in HCM, HR and the development of labour, we take cognisance of the implications of government’s policy on the market and on the economy.
Clearly government is looking to reduce expenditure, cut costs and find ways to make up fiscal shortfalls, of which there are many.
We have listed the main takeaways from the presentation – the points that should make employers sit up.
The projected GDP growth forecast for 2017 has been revised down by almost half, from 1.3% forecast in the February budget to 0.7%.
Treasury’s revenue shortfall currently stands at R50.8 billion, amounting to 4.3% of SA’s gross domestic product (GDP) and around 38% higher than expected, the largest shortfall in revenue collection since the 2009 recession.
The main budget deficit, which determines government’s net borrowing requirement, will be 4.7% of GDP this year.
To offset revenue shortfalls and reduce borrowing, the contingency reserve has been pared down to R16 billion over the next three years.
National Treasury is considering tax hikes and spending cuts as it tries to stabilise gross debt below 60% of GDP.
It is expected that income taxes will almost certainly increase next year, and the top income brackets will likely see the highest increases once again.
Details of the budget policy proposal will be announced in the February 2018 budget.