Home | Business | RIJKENBERG, MBOWENI ADDRESS SAME BUDGET ISSUES

RIJKENBERG, MBOWENI ADDRESS SAME BUDGET ISSUES

27/02/2021 23:53:00 BY MFANUKHONA NKAMBULE

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mfanukhona@times.co.sz

MBABANE – The budget speeches delivered by Neal Rijkenberg and Titus Tito Mboweni respectively contain some similarities, but their approach to issues is different in some aspects.

Mboweni, the South African Minister of Finance, delivered his budget speech on February 24, 2021 while Rijkenberg delivered his on Friday.

In terms of currency, this publication will use Lilangeni even where the money is in Rands. The Lilangeni (SZL), introduced in 1974, is pegged to the South African Rand (ZAR).

For starters, what is glaringly missing in Rijkenberg’s speech could be a topical issue raised by Mboweni wherein he pointed out that South Africa would upgrade and expand its six busiest border posts in order to improve access to African markets.

Actually, South Africa’s six busiest border posts for South Africa are Beitbridge, Lebombo, Maseru Bridge, Oshoek, Ficksburg and Kopfontein. Budget analysts said they expected Rijkenberg to address the proposed upgrade and expansion of Oshoek Border Gate at Ngwenya, which Eswatini share with South Africa.

“In order to improve access to African markets, our six busiest border posts will be upgraded and expanded. These will be significant infrastructure interventions using the PPP model. Starting with Beitbridge, which was built in 1929 and last upgraded in 1995, these one-stop-border-posts will harmonise the crossing of borders by people and goods, eliminating the dreadful scenes we witnessed recently,” Mboweni said.

Pertaining to borders, the Eswatini minister of Finance said the country continued to be number one in trading across borders in Africa and ranking number 32 out of 190 countries in the world.

However, both ministers talked about the newly launched African Continental Free Trade Area (AfCFTA). Mboweni said the AfCFTA presented the opportunity to deepen South Africa’s trade and financial linkages with the continent.

“Following last year’s budget announcement on supporting the African Continental Free Trade Agreement through a more modern risk-based capital management flow system, much progress has been made to implement the new system, and new regulations will be published by the South African Reserve Bank shortly,” he said.

On the other hand, Rijkenberg said new trade opportunities were being created, including the AfCFTA and Economic Partnership Agreement (EPA) between Southern African Customs Union member States and Mozambique and United Kingdom and Northern Ireland. He said both AfCFTA and EPA became operational on January 1, 2021.

SACU

They also addressed one of the country’s budget-boosting revenue, SACU.

The South African minister said payments to the Southern African Customs Union have been revised upwards by E1.9bn in 2022/23 and E15.5bn in 2023/24 to E137.3bn over the medium-term.

He then said the African Renaissance and International Cooperation fund support projects that enhance African trade, economic development and integration. As a result, an allocation of E148.1 million is set aside for this purpose.

The Eswatini minister, in his speech, said SACU receipts declined from E8.35bn in 2020/21 to E6.38bn on in 2021/22. He was talking about receipts for the country.

Driven by higher-than-average SACU receipts, he then said revenue collection in 2020/21 was at record highs. As a consequence of the pandemic, however, he said SACU receipts weree projected to decline significantly and steadily over the medium- term. “With the projected pressure on our revenues, the next three years are going to be even tougher,” Rijkenberg said.

Public debt

There was also a supposedly huge public debt, which they had to address.

Mboweni mentioned in his speech that South Africa would stabilise government debt at 88.9 per cent of Gross Domestic Product in 2025/2026 and the ration, he said, was expected to decline thereafter.

“This is a significant improvement to the framework we presented in October last year and creates a sound platform for sustainable growth,” he said.

South Africa’s debt is E3.96 trillion. It is well above the 35 per cent recommended by the International Monetary Fund (IMF).

Mboweni said high government debt levels increased the cost of borrowing across the economy. He pointed to the fact that the rising debt led to higher future taxation and uncertainty.

He mentioned that servicing this rising debt took away resources that could have been invested in infrastructure and frayed their social solidarity.

“The path is challenging, but achievable. It is the most prudent way to achieve higher levels of prosperity and avoid a sovereign debt crisis,” Mboweni said.

On the other hand, Rijkenberg of Eswatini said government’s total public debt stock was estimated to reach E28.4bn in 2020/21, which translates to 45 per cent of GDP. He said the scope for extending domestic financing was saturated and government, therefore, negotiated budget support from external multilateral financial institutions.

Personal tax

They showed an identical attitude towards taxation, with Mboweni stating that he had requested tips from the public to help him craft his budget. He said many tips spoke about limits to increased taxation.

As a result, the minister said the Government of South Africa agreed that tax increases should be kept to a minimum as they stabilised their public finances. He said they had chosen not to introduce the E40 billion in tax measures initially proposed in the October Medium-Term Budget Policy Statement (MTBPS).

Addressing taxation, Rijkenberg said although certain tax increases mentioned in previous budget speeches were under review, government ‘does not plan to increase any taxes significantly in the short term.’ Instead, he said government was constantly trying to find ways to bring more non-taxpayers into the tax net and reduce tax evasion.

“Government has spent the last two years fixing the foundations, creating fiscal space through greater efficiencies in spending, without resorting to significant increases in taxes, ballooning arrears or deficits,” he said.

Corporate tax

In his speech, Minister Mboweni was specific about the corporate tax rate, which companies there would pay or expected to pay. He said the corporate income tax rate would be lowered to 27 per cent for companies with years of assessment commencing on or after April 1, 2022.

“This will be done alongside a broadening of the corporate income tax base by limiting interest deductions and assessed losses,” the minister said.

He added: “We will give consideration to further rate decreases to make our tax system more attractive.” He said South Africa was going to undertake this exercise in a revenue-neutral manner.

“We also intend to leverage the insights of the Davis Tax Committee as we undertake this reform,” he said. The current corporate tax rate is 28 per cent in South Africa. Personal tax can be as high as 45 per cent. In Eswatini, Rijkenberg was not specific. It must be said that government had, however, expressed desire to reduce the corporate tax from 28.5 per cent to about 12 per cent.

In his budget speech, the minister of finance said corporate income taxes were expected to be E1.86bn in 2021/22

All companies generating income within Swaziland are taxed on that income at a flat rate of 27.5 per cent.

Economic outlook

Mboweni said the global economic growth was expected to rebound to 5.5 per cent in 2021 before moderating slightly to 4.2 per cent in 2022, spurred on by the expected rollout of Covid-19 vaccines and other additional policy initiatives.

He said China was expected to grow at 8.1 per cent in 2021, while India would achieve a growth rate of 11.5 per cent in 2021. The minister said sub-Saharan Africa is forecast to grow by 3.2 per cent. Rijkenberg said the IMF forecast sub-Saharan Africa’s economic activity to contract by 3.0 per cent compared with a pre-pandemic forecast of 3.6 per cent growth.

He said South Africa’s economy grew by a mere 0.2 per cent in 2019 as a result of the labour strikes, energy supply disruptions and weak agricultural production. In 2020, as a consequence of the pandemic, Rijkenberg said the IMF revised South Africa’s growth from a positive 1.1 per cent to a negative 7.2 per cent. Nevertheless, towards the end of 2021, he said growth was anticipated to rebound to 3.3 per cent.

COVID-19

They both addressed the pandemic, which turned the whole world upside down.

Mboweni said: “Since then, we have mourned the passing of nearly 50 000 of our fellow South Africans as a result of the Covid-19 pandemic. The damage caused by Covid-19 runs deep and we share in the collective pain of many South Africans who have lost their jobs.”

Rijkenberg said during his prevbious speech, which he delivered on the February 14, 2020, Eswatini Government and the world at large had only started to hear about what would quickly become the defining event of this era – the Covid-19 pandemic.

“We honour the memory of every person that has succumbed to this pandemic and mourn our collective loss, including the untimely demise of our colleagues and friends in government,” Rijkenberg said.

He said: “This virus has caused tragic loss of life and the various lockdowns, and limits on economic activities to curb the spread of this disease, have caused immense economic hardship and pain.”

“We stand in solidarity with every family that has experienced grief, suffering and uncertainty through the last year.”

He then extended his gratitude to frontline workers for their strength and sacrifices through these trying times.

Corruption

The minister of finance in South Africa said the Department of Justice and Constitutional Development would get E1.8bn to improve business processes. He said this allocation would support brave law enforcement agents in the fight against crime and corruption.

“We are bringing the long arm of the law into the digital age through the Justice Modernisation Programme,” he announced.

Eswatini minister of Finance said crime prevention measures, structures and legislation would be strengthened to ensure corruption was combated.

“However, we are on a mission to change the fabric of our economy; reforming our regulations and processes to accommodate efficient spending, limiting waste, rooting out corruption, overhauling our tax system and ensuring effective service delivery,” he said.

“We are steadfast in our resolve to take deliberate and decisive action to put this economy on a sustainable path to realise its full growth potential.”

Youth empowerment

Mboweni did not just talk about this issue or give feedback on what young people have done, but government showed great commitment to youth empowerment.

He said: “We are now augmenting this by E11bn for the Presidential Youth Employment Initiative, taking the total funding for employment creation to nearly E100bn. This is in response to the job creation targets for young people outlined by the president.”

Rijkenberg said Eswatini Government has continued to strengthen its partnership with Junior Achievers and ENACTUS. He said all these efforts were undertaken to cultivate entrepreneurship in the country’s youth.

He said the Royal Science and Technology Park was leading the innovation ecosystem which would enable the generation of locally made products by inventors and start-ups.

Through the incubation programme, he said close to 40 start-ups directed by the local youth received this support every year.

These enterprises were able to collectively turn over approximately E20m in 2019/20, the minister said. “This was achieved by facilitating product innovation, business development, intellectual property protection and fundraising support,” he said. Mboweni did not specifically address the issue of imports and exports, which Rijkenberg highlighted in his budget speech. The Eswatini minister said exports declined by a mere 3.2 per cent to E27.8bn.

He said exports continued to be dominated by miscellaneous edibles, sugar, wood products and textiles, 65.2 per cent of which were destined for the South African market.

On the other hand, he said imports remained suppressed in 2020 due to the COVID-19 restrictions, declining by 3.5 per cent to E24.1bn.

He said the majority of imports being energy were electricity and fuel, followed by food imports.

During 2020, he said about 70.6 per cent of imports were sourced from neighbouring South Africa. He noted that the depreciation of the exchange rate from E14.4 in 2019 to E16.6 in 2020 on average against the US Dollar made Eswatini’s exports more competitive while imports became more expensive.