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BUSINESSES URGED TO TAKE ADVANTAGE OF TAX REPRIEVE

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MBABANE – Following the budget speech by the Minister of Finance, Neal Rijkenberg, Business Eswatini (BE) has highlighted issues of concern for the private sector.

BE Chief Executive Officer (CEO) Nathi Dlamini yesterday released a comprehensive reaction to the 2024–25 budget. He said the minister of finance made an attempt to address a number of the issues that were of concern to the private sector. The CEO said it was for this reason that they congratulated the minister for putting together a national budget that was both sensible and realistic.

Approach

Dlamini mentioned that the endorsement of the speech by the business community was also due to its sober-minded approach and commercial sensibility, which he said seemed to pervade the minister’s script throughout his presentation. “As an example, and perhaps crucially, the temptation to raise all manner of taxes was always there, but the minister refused to yield to the temptation as it would have had a devastating effect on the country’s fragile economy. Moreover, there is a point beyond which taxes cease to be a viable and sustainable source of revenue for the government. The limit is breached, as this country is already very close to that threshold, taxes become a disincentive for companies to invest and people to seek gainful employment due to punitive taxes,” he added.

Dlamini mentioned that as a secretariat, they encourage companies to take advantage of this tax reprieve, however, insignificant it may be, and reinvest their savings into productive assets and retool their businesses for the next phase of economic growth and expansion in this country. “The tone and tenor of the budget speech suggest that government is now firmly poised to get this country back on its feet, despite the many challenges in the way,” he mentioned. Dlamini said BE noted that the budget did not spell out clearly the timelines for the repayment of the debt, be it local or foreign.

Strain

He said a delay in debt repayment by the government puts a strain on business operations, which in turn stifles business growth. “It is for this reason that we request the government to ingeniously find avenues through which they can settle government debt quickly, starting with the liabilities of the private sector,” he added. The executive mentioned that it was also noted that the government borrows more funds from local sources than it does from external sources. He stated that domestic debt was reported to be 23.35 per cent of GDP, while external debt was reported to be 19.5 per cent of GDP. “We still encourage the government to borrow in local currency or, alternatively, within the Common Monetary Area, so as to avoid the forex risk inherent in foreign loans,” he said. The CEO mentioned that one of the major causes cited for the struggle of businesses to reach acceptable profitability levels was the erosion of disposable incomes of consumers as a result of inflation. He said there was an urgent need to protect the disposable incomes of consumers through various policy levers that were not too painful to the intended beneficiaries. “That is why business has welcomed the move to freeze increases in income tax,” he said.

Policy

Worth noting, the government of Eswatini announced that it would now be pursuing an expansionary fiscal policy, shifting from the contractionary monetary policy. This policy will increase money circulation, influence the reduction of unemployment, and enable the government to lift its hiring freeze. By pursuing this policy, the government will be able to reduce unemployment, increase consumer demand and avoid a recession. Worth noting, the Central Bank of Eswatini (CBE) pursued a restrictive monetary policy, also known as the contractionary monetary policy stance in 2022, which led to the cumulative increase of the discount rate by 275 basis points. In his budget, the Minister of Finance, Rijkenberg, said that through the adoption of a more expansionary fiscal policy, this budget sought to make additional provisions for the most critical and mandatory line items and programmes to ensure that operations were not compromised.

Enhanced

He said attention was given to making enhanced provisions for previously compromised budget lines and programmes such as tertiary education scholarships, free primary education grants, more grants for the elderly and the disabled, youth empowerment programmes, public investment and capital expenditure. This, he said, did not imply reckless and irresponsible spending, but rather a shift towards striking a balance between improving lives and livelihoods, while supporting long-term growth. “The short to medium term monetary policy outlook remains uncertain with an upward bias threatened by persistent inflationary pressures at the global level, with inflation remaining way above target in advanced, emerging, and developing economies. The Central Bank of Eswatini is, therefore, likely to continue pursuing a relatively restrictive stance in line with regional and global monetary policy conditions,” he added.

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