Entering its 7th year of recession, South Africa’s inability to achieve economic growth of over 1,4% has led to socio-economic issues such as poverty and unemployment to continue to plunge into lower levels. The country’s GDP speaks volumes – entering a technical recession creates a bleak picture for many business owners in the country – is there any hope?
The highly anticipated budget speech which was delivered by Finance Minister Tito Mboweni on the 26th of February further highlighted the huge gaps of inequality in the country. The minister’s optimistic attitude was evident – he compared the economic crisis to that of the Aloe Forex which is an indigenous plant known for its ability to survive under tough, dry spells. He lay out a 3-year reform plan which was characterised by Consolidation, Reform, and Growth – seeking to address the current issues faced by the country. The budget speech produced both good and bad news, whichever way the news is perceived, big changes are planned by the minister, and at Tusanang, we’re here to help navigate them.
Mboweni delivered the news that supports the ignition of start-ups with the idea that the economy will reap fruitful solutions. He further promised to review: The small business tax regime, the VAT registration threshold, and the turnover tax to make recommendations that will support the entrepreneurial efforts of small businesses to create breeding environments for job creation. With a documented, 8.2 million youth unemployed, skills development efforts are an integral part of creating effective remedial solutions. We at Tusanang strive in this – we provide several SETA accredited trainings. Our Skills Development services aim at delivering innovative, industry leadership programs aimed at educating and upskilling people in line with BEE Codes of Good Conduct. The cut in corporate tax has resulted in glee for many – this better positions businesses to grow and invites prospective investors to sow in the economy. The reduction of corporate income tax over the next 5 years will place the country at the same level as its trading partners, says Mark Goulding, EY Global compliance & reporting partner.
South Africa’s growth forecast has been lowered from 0.7% to 0.4 by ratings agency Moody’s due to the pandemic Coronavirus which is expected to slow the growth of G-20 countries. With China being the country’s biggest export partner, the Asian forecasted growth has dropped from 6% to 4.8%, which will also have an impact on South Africa’s economic growth. The 13 confirmed cases in the country over the week have heightened the concerns of many citizens, creating distress over our health resources. The growing concerns of load-shedding have continued to threaten the longevity of businesses both in the formal and informal sectors. Considering the inequality in the country, many organisations have no alternative for a power source, which forces them to pause on their operations in times of electricity shutdowns.
The minister’s inability to introduce new forms of remedial activities places the country in a difficult position – crunching issues relating to inequality and unemployment remain an issue that progresses in failure due to the consequences of the country’s past. The reduction of tax hikes such as PAYE, has been described as a form of consolidation by News 24 columnist Jaynisha Patel. The idea that creating more relaxed environments for taxpayers and businesses will help remedy the economic burden of the country means that the pressing issues of major developmental structural challenges come to a standstill.
It has been predicted that the first quarter of this financial year will prove to be difficult, despite the minister’s optimism. While South Africa is not alone in this regard, the issues which are specific to our economy continue to show symptoms of a worsening recession. While we wait to see the fruits pertaining to the efforts mentioned by the finance minister, the 2020/2021 finical one has been predicted to be an interesting one as the introduction of a new decade begins. President Cyril Ramaphosa’s reform agenda is expected to produce fruits of ‘jumpstarts’ according to the minister, which also remains to be seen.