Debtfree October 2018

MID TERM
BUDGET SPEECH
The Rand which had jumped
earlier in the month, after
Presidential promises of
financial stimulus, dived in the
wake of the Mid Term Budget
Speech which presented a
realistic view of local economic
growth and pointed to more
national debt to come in the
next few years. The speech
by newly appointed Finance
Minister Tito Mboweni tried
to be optimistic while dealing
with some of the hard issues
at hand which is going to see
the country experience some
really tough times ahead.
Minister Mboweni described the
economy as currently being at
a “crossroads”. Major areas of
budget spending will include
health and education where
an amount of around R5.9
trillion is allocated and R911
Billion on “social development”.
R203 Billion will go towards
the military and related costs.
An amount of R5 Billion has
been set aside to help save SAA
and another R1.5 Billion for SA
Express. The Post Office will be
getting R2.9 Billion to try to keep
it afloat as it takes on its new
role handing social service grant
payments. It was announced
that no additional taxes are
planned for 2019 unless the
“economic environment” calls
for it. Recent changes at SARS
mean that finally, many refunds
which should have been handed
out and were not will now be
distributed. But SARS has been
collecting less than expected and
the economy has not been doing
well. Treasury had previously
predicted a 1.5% growth (GDP)
but this has now been reviewed
down by 50% to a much more
modest 0.7%. National debt is
set to increase to 58.5% of GDP
by 2022 (that’s an extra 3% over
what it is now). Also because
National debt is often in foreign
currency a weaker Rand can
have a negative effect. Recently,
the Rand has been doing poorly
and this accounts for 70% of the
anticipated R48 Billion increase in
debt.