ZANDILE MAKHOBA: In election year, 2024’s budget might take it easy on beset citizens

Ordinary consumers and taxpayers have every right to be concerned that the 2024 budget may bring further hardship in these challenging economic times. But having said this, there is a sense that the government is sensitive to these concerns, particularly because this is an election year.

There is no doubt that the 2024 budget will be challenging for the Treasury with several factors at play. First, the SA economy has continued to record weak economic growth since the 2020 Covid-19 lockdown, with recovery ailing year-on-year due to several internal and external factors — the most significant being conflict and instability in Eastern Europe, which has hurt commodity prices and therefore key industries in the SA landscape.

The 2023 medium-term budget policy statement projected a revenue shortfall of R56.8bn, largely attributable to low corporate income-tax revenues. The Treasury estimated GDP growth at 1% for 2024, which suggests that tax revenues are likely to continue to be of concern in the coming fiscal year.

Possible tax rises

What implications does this have for taxation in the coming year? Looking to consumers already dealing with high-interest rates and inflation to do this raises several concerns. Minor adjustments to personal income-tax rates or the VAT rate could provide for this amount; however, the Treasury will be sensitive to the ongoing challenges at the household level, as the cost of living continues to be a struggle for consumers.

This also needs to be balanced with the consideration that it is an election year, and the government may not be willing to upset voters ahead of the election with dramatic changes to taxation.

There are other options, though. The first is looking at improving revenue collection by improving collection efficiency at Sars as several economists and analysts have suggested. Automation and digitisation, as well as swiftly addressing tax fraud and evasion would make up for lost revenue. The other options are more of a long-term play, involving creating an enabling environment for economic growth.

Areas of potential government assistance

With the budget already under strain, expansionary fiscal policy that would stimulate economic growth is already limited. The 2024 budget should detail plans to encourage private-sector investment in infrastructure, in particular energy, logistics and water with the medium-term budget policy statement indicating plans for collective infrastructure investment and private-public partnerships to get the work done.

In terms of expenditure, no major changes are expected. It can be argued that a notable contribution to grants and the wage bill is much needed. Without it, socioeconomic conditions could escalate within an already tense consumer climate. Ratings agencies will no doubt keep a close eye on these developments.

Managing your household budget

The possibility of tax increases for the government to make up lost revenue cannot be ignored in the 2024 budget. In the case of this happening, consumers who are already under intense pressure will find themselves having to face further price increases and having to adjust their stretched budgets accordingly. This will present several tough choices for ordinary people.

The best plan in this case is to consult a financial adviser who can take an independent view of your household expenses and offer a wide variety of options to manage your spending.

Facing situations involving further financial demands should never be a cause for alarm, and it should be said that taking steps such as getting rid of insurance policies to save money could potentially put you in an even more difficult situation should something adverse happen. Seeking help in the form of an adviser is always the best option in these kinds of situations.

• Makhoba is head of specialist research and analytics at Liberty, an insurance arm of Standard Bank