A look at SA's 'self-congratulatory' budget

The general feeling about South Africa’s national budget speech is that it was quite prudent given the current challenging economic environment. "It is strict and sticks to proven measures," said Maarten Ackerman, senior investment strategist at Citadel Wealth Management. "There are certainly more details than what was the case in the mid-term budget announcement in terms of how government will achieve its objectives." Given that the economic environment has deteriorated since the medium-term budget in October 2013, Treasury has adjusted growth estimates accordingly and has been quite strict in terms of keeping expenditure under control, to ensure the budget deficit can sufficiently be addressed. "As it is an election year, it is no surprise that there were no major shifts in the tax regime. In addition, there were welcome initiatives towards consumers and smaller businesses," said Ackerman. Retirement “At a glance, there doesn’t seem to be any significant changes to the retirement fund reform initiatives mentioned by Minister Pravin Gordhan in his 2014 Budget Speech," said De Wet van der Spuy, Director of Product at Liberty Corporate. "We, however, commend the minister for reinforcing the need for individual retirement savings, and we look forward to more information to be released around the tax efficient savings vehicles to be implemented in 2015.” He is encouraged to see a focus on ensuring access to employee-sponsored retirement plans, as six million South Africans do not currently have access to such plans. "This seems to be further supported by a move towards mandatory retirement contributions and preservation savings in the future,” said Van der Spuy. Arno Loots, head of umbrella fund solutions at Liberty Corporate, said if retirement reform is shaped as expected, as reinforced in the 2014 budget speech, one may see a greater degree of consolidation of employer-sponsored retirement plans into umbrella funds. "We believe the aim of the retirement reform proposals is improved governance, simplicity, greater access and lower costs, which implies that umbrella fund solutions will be the natural choice,” said Loots. Commerce The Cape Chamber of Commerce and Industry regards the budget as self-congratulatory, thin on detail, heavy on rhetoric and exactly what they expected just two months ahead of an election. There were, however, some sound decisions which business welcomed. "We welcome that Minister Gordhan has acknowledged that government must support business to grow exports and that he is working on streamlining the regulatory environment to achieve this growth. We are particularly heartened that Treasury has placed such a high priority on Africa as a trading region," said the Chamber. "The Cape Chamber has long been focused on nurturing intra-African trade and the commitment to reduce on-tariff trade barriers is good news indeed." It is also encouraged by his efforts to support entrepreneurs and his acknowledgment of the importance of small business. "However, we believe the government is being optimistic about creating six million job opportunities in the next three years," said the Chamber. "More particularly, we would like to know if these will be focused on wealth-creating jobs in the private sector, or simply more wealth-consuming jobs in the public sector." Lastly the Chamber is worried about the constant references made to transformation and the BBBEE reforms also pointed to in the SONA address. "This gives business reason for concern as to what will happen post 7 May – not a good environment for business to take the steps needed to expand and build a growth economy," the Chamber said. Infrastructure Charles Brewer, managing director of DHL Express Sub-Saharan Africa, said he is happy about the R847 billion is to be spent over the next three years on infrastructure development. “The increased infrastructure spend will have a positive impact on the domestic economy and trade, and will generate positive spill-over effects such as increased trade with key African territories,” said Brewer. He also welcomes the government’s support of border management and said that the pilot project for seamless border management at one the ports in SA will positively impact trade facilitation. “Foreign investors and trading partners are sometimes discouraged from dealing with South Africa due to complex exchange controls, tax and other complicated regulation. Overcoming these challenges will increase South Africa’s profile as an attractive trading partner,” he said. Technology Kevin Hurwitz, CEO of Wonga.com SA, was disappointed about the ongoing focus and seeming dependence on the mining sector and mineral resources – even as Gordhan himself acknowledged that demand for these resources has moderated and seems unlikely to pick up soon. "We need government to start paying real attention to the knowledge economy – because this is the future of our economy," said Hurwitz. "We welcome, however, confirmation that Sars is working closely with other agencies to share electronic data." He thinks this is one of the ways of helping South African business operate within the digital world. "The fact that this could assist in reducing identity fraud is admirable, but is certainly not the only benefit of this kind of data-sharing," he said. CAPE TOWN NEWS24