How Does The Emergency Budget Impact On You?
How Does The Emergency Budget Impact On You?
No new taxes for individuals were announced during the June 2020 Emergency Budget Speech. This means that for now there is no obvious impact on you unless you work for a failing SOE which will not be getting more bailout funding.
Borrowing More And Trying To Spend Less
Although the details change, most budgets are designed to determine how much money is going to come in (for consumers this is at the end of the month when they get paid) and how to spend that money on the various expenses and debts that you have. There is little difference between when the Government does their budget and when a consumer does theirs’ except for the amounts involved. Governments talk about income and expenditure in Billions of Rand. Overall, however, the concept is exactly the same.
‘There is little difference between when the Government does their budget and when a consumer does theirs’ except for the amounts involved’
At present, SA has a lot of debt. It takes a lot of tax money just to pay the interest portion of those debts nevermind the actual capital portion of these debts (which would reduce the amount owed).
There are also all sorts of things that SA residents need or want and expect Government to provide for them. At the moment, a lot of that is social aid and expanded spending on health services. It is no surprise then that the interim budget or Emergency Budget focused on these areas.
First Finance Minister Tito Mboweni spoke about how tax income is going to take a knock (because people are not earning and businesses are not doing well since they have been closed or without clients). So far they are seeing about R300 Billion less come in through taxes this year. This means less money than ever to spend and having to rely more on borrowed funds.
Though there may be changes to taxes next year there were none announced in the June budget speech.
Worst Economic Year Since 1930
It is predicted that the economy will shrink by 7% (or more). In fact, the situation is going to be the worst it has been in almost 100 years with job losses and business closures as a result of the lockdown and reduced consumer spending due to the Covid-19 pandemic.
The Minister then spoke about how SA is going to have to borrow more to cover added costs. In particular, they are going to borrow $7 billion to fight Covid-19. This means that there is more debt for the future and so higher interest portions that will have to be paid just to keep the debts stable and prevent a runaway debt situation.
Tito then explained that there is going to be a shift to spending less on most things. At the same time, the amount spent overall will be more than R2 Trillion (first time ever).
There was not a lot of detail on how this is going to happen exactly and some people have said the speech sounded more like a plea from the Minister to Government to please spend less and get on board with cutting costs wherever they can instead of carrying on as before.
New ‘Covid-19’ Spending
- An extra R21.5 Billion will be spent on Covid-19 related health matters and another R12.6 billion for “frontline” response efforts.
- An extra R25.5 billion is being added to the Social Development Department to provide Covid-19 related relief.
- It was announced that R100 Billion is going to be used to create jobs. This is key since so many people are already unemployed and even more will lose their jobs in the weeks ahead.
The Mandatory Bail Out
Would any budget speech be complete without a bailout for someone? Well, the tradition continues in part with R3 Billion that is going to be given to Land Bank – so that they have some money in the coffers to use for business (which will keep them in business). There was, however, no mention of saving SAA or Denel with yet another bailout.
Your Own Budget
If you have not already done so then please work out your own budget. Write down what money you will get in and then make a list of the existing debts you have and how much you must pay towards them. Then look at your monthly running costs. Check if you can pay for and save towards all the things you need.
‘you should talk to a Debt Counsellor about how you can use the National Credit Act and debt counselling to reduce what you have to spend on your debts each month’
If you find the figures don’t balance then you need to make cuts. If that doesn’t look realistic then you should talk to a Debt Counsellor about how you can use the National Credit Act and debt counselling to reduce what you have to spend on your debts each month. This can make all the difference and help you and your family to cope with the though times ahead.