Finance Minister Nhlanhla Nene delivered a gloomy budget speech on Wednesday and announced as expected personal income tax will rise, economic growth forecasts cut and widened budget deficit estimates.
Personal income tax will rise by 1% for everyone earning more than R181,900 rand. This is going to be unpopular with the public and businesses suffering from already sluggish growth.
Government revenues will remain depressed, leading to a budget deficit of 3.9 percent of GDP for the 2015/2016 financial year, above the 3.6 percent forecast in October.
Substantial upcoming debt repayments meant government could no longer postpone raising additional revenue, including an increase to personal income tax rates.
“Today’s budget is constrained by the need to consolidate our public finances, in the context of slower growth and rising debt,” Nene said.
This is the biggest hit to the South African tax payer since the start of democracy – and this is happening while the governing party is set to make billions from government plans to start fracking the Karoo to pieces.
While the government deficit has hit R15 billion the tax rises are aimed to hit the top echelons of society – the little percentage that can afford to pay tax – extremely hard. Those who are already paying the most tax will be hit the hardest.
Meanwhile government will maintain its hold on the failed electricity “supplier” Eskom while the ruling ANC party cash in on manipulating tenders to try and get the dinosaur back in proper production.
Meanwhile South African president Jacob Zuma is to announce that the South African government will explore in-land and offshore shale gas reserves. This comes shortly after the ANC upped its investment in Shell… the company at the forefront of global fracking.
The ANC’s investment subsidiary, Batho Batho, owns more than 50% of Shell’s BEE partner, Thebe Investments. Thebe, in turn, owns 28% of Shell South Africa. It does not take a degree in bean counting to see where this will end up.
Shell has been pushing for licenses to frack for shale gas in the Karoo despite environmental activists doing everything they can to prevent it. Government licensing for fracking is expected very soon and it will be no surprise of the ANC backed horse will win the race.
The ANC will directly benefit from Shell winning the bid. The incentive is for ANC to push ahead with fracking despite environmental concerns.
