A death knell would have been more cheerful than the reports that followed on from the 2015/2016 fiscal year budget speech by South Africa's Minister of Finance Nhlanhla Nene (pictured,). Over month on, Wilhelmina Maboja reflects and explains why.
As Finance Minister Nhlanhla Nene prepared to deliver his much-anticipated budget speech, the press, as well as an anxious nation, were in full budget mode, amid rumours and warnings of more belt-tightening, increased fuel and sin-taxes, and even tougher times ahead for South Africans.
Nene did not hide his head in the sand in his address, diving straight into the fact that a number of social ills had to be contended with in the South African economy, such as poor education, sanitation and unebbing poverty, at the same time as fighting off the country's current sluggish economic growth. Poverty, in particular, has been one of the biggest challenges for post-apartheid South Africa. 45.5% of South Africans live in poverty according to Statistics SA and women are disproportionately affected.
A key focus in the budget was the National Treasury's plan to increase the top rate of income tax by one percentage point to 41%. Those affected make up 10% of the population and hold over 70% of the country's wealth, according to a report by the Credit Suisse Research Institute.
Alex Smith, an economist at First National Bank, explains that while the increase in income tax, particularly for the wealthy, is a sign of a number of factors, it's nothing for people to get in a panic about.
"We have a very severe income inequality problem in South Africa. [It] is one of the most unequal societies in the world, so the idea that the finance minister proposed for income tax has to do with income inequality, bearing in mind that the income tax rate only increased for those individuals who earn above R180.000 a year," says Smith.
"By international standards, South Africa's personal income tax rates are relatively low. There are certain countries in the world with much higher personal income tax rates. It's part of a broader move by the Treasury to generate structurally higher revenues, so I think it wouldn't be at all surprising to see further tax proposals come through over the next couple of years," he adds.
Between 2011 and 2015, based on World Bank figures, South Africa's GDP growth forecast has been in steady decline, from 3.6% then to 2.2% currently. This is a slight recovery from a harsh 2014, where mining and...