Exclusive: Expert Explains the Effects of the 2021 Budget Speech

Exclusive: Expert Explains the Effects of the 2021 Budget Speech

- Following the 2021 budget speech, South Africans were left with a lot of questions

- Dr Nthabiseng Moleko of the University of Stellenbosch Business School broke down what was said in the budget speech

- Dr Moleko spoke to Briefly.co.za about changes that could've been made and other adjustments from the 2021 budget speech

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Dr Nthabiseng Moleko believes the country needs a lot more decisive and immediate actions to propel inclusive and labour-intensive growth. Dr Moleko believes that the current plans aren't outlined clearly:

"If the assessment of the economic recovery programme has shown a positive effect we should see the economic indices reflecting that.

Briefly.co.za spoke to Dr Moleko about other issues facing the country and what will be the outcome of changes announced in the budget speech.

Exclusive: Expert explains the effects of 2021 national budget speech
Dr Nthabiseng Moleko of the University of Stellenbosch Business School broke down what was said in the budget speech in this Briefly.co.za exclusive. Image: Supplied
Source: UGC

Speaking on the effect of the increase in the fuel levy, Dr Moleko said it was negligible for middle to high-income earners:

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"Irrespective of the fact that it is an increase it doesn't necessarily have a massive adverse effect on reducing economic activity. The impact of the price of transport for example, taxi owners and the likes could be affected due to the cost of petrol."

Dr Moleko spoke about the low-income earners in the country's population being effected more:

"The poorer in our population is likely to suffer an impact where consumers now are the poorest of the poor. The higher cost in terms of prices in the taxi industry would increase the price of moving their end-user.
"The fuel effect will impact the poor as the impact on middle-income to upper-income people is negligible. The impact of a higher fuel levy is harder hitting on the poorer population."

Dr Moleko said other ways to alleviate pressure need to be looked at:

"They (poorer population) spend more proportion of their income on food and transport. These are the big costs in the majority of low-income households, which takes the big bite of the total disposable income.

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"Job creation is the key. Industrialising and enabling that we improve the proportion of our output coming from industrialised sectors. What this would mean is that more people will have jobs in households, more people are economically active. This is the number one priority that the government should look at."

Speaking about the 5% increase in the personal income tax bracket, Dr Moleko said:

"This adjustment reduces tax revenue by a small amount of R2.2 billion. The R2.2 billion revenue loss is, if you look at it, very minimal. In the budget speech, the minister talks about who this will affect.

Finance Minister Tito Mboweni stated that if one is below the new-tax threshold they will have an extra R756 in their pockets. When asked if this would alleviate pressure on consumers, Dr Moleko said:

"The government will make it back in other increases. The relief is a minimal relief but it's good. Any tax relief is good."

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The small increase in social grants created quite the uproar on social media as South Africans voiced their concerns about the minimal relief. Dr Moleko explained the increase and how it impacts South Africans:

"The incremental grant will be increased by three months. The distress social grant will also be extended by a three month period. The need for social grant is primarily because we have the unemployment level disproportionately high.
"People are not actively working and participating in the economy. Social grant, social stress relief and the UIF related temporary relief measures. For me, I believe what South Africa needs to focus on is getting all South Africans working."

Dr Nthabiseng Moleko is a development economist at the Stellenbosch Business School.

Briefly.co.za reported on the 2021 national budget speech and the changes announced by Finance Minister Tito Mboweni. Mboweni announced that corporate income tax will be lowered by 27%.

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The minister also spoke about the increase of the personal income tax bracket, fuel levies and an increase in excise duties (sin tax) on alcohol and tobacco.

Briefly.co.za takes a look at some of the key points discussed by the minister in his speech.

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Source: Briefly.co.za

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