Top 10 takeaways from the budget speech

March 5, 2022

An anxious South Africa awaited Finance Minister Enoch Godongwana’s Budget Speech on 23 February in the face of increasingly tough economic conditions in most of the nation’s industry sectors. It was delivered – and the immediate response was cautious optimism.

Pple Hospitality and Healthcare have done some investigating to find out what the highlights are – for business in general in South Africa, and more particularly, for the healthcare and hospitality sectors.
At the outset of his speech, Godongwana acknowledged, “Our economic recovery has been uneven and risks remain high. We must proceed with caution.”

Deloitte’s in-depth commentary notes that this was a positive budget speech for Minister Godongwana: “We commend his commitment to the reconstruction and recovery of the economy; saving lives and restoring livelihoods; as well as securing long-term prosperity of South Africa.”

Deloitte summarised some significant tax aspects, and we include highlights here that might be relevant to you as individuals and to your businesses:

1. An inflationary 4.5% adjustment to personal income brackets to avoid fiscal drag
2. Taxes increased for alcohol and tobacco (by between 4.5% and 6.5%)
3. Carbon fuel levy to increase by 1c to 9c/litre for petrol, and 10c/litre for diesel, from 6 April 2022
4. Corporate income tax rate was reduced from 28% to 27%, for companies with years of assessment ending on or after 31 March 2023. This decrease was enabled by the new rules relating to the limitation of assessed losses and by reducing certain incentives
5. The multi-year customs infrastructure modernisation programme is underway, with an initial focus on digitising border operations, notably including Beitbridge
6. Regarding carbon tax, phase 1, which provides various allowances to reduce taxable emissions, has been extended to 31 December 2025, but after this date, rates will increase substantially to around US$20 (about R300) a tonne by 2026 and will continue to increase rapidly thereafter
7. The employment tax incentive will be expanded through a 50% increase in the maximum monthly value to R1 500, and government anticipates that this will provide additional support worth R2.2 billion

For healthcare

8. An additional R15.6 billion is allocated to provincial health departments to support their ongoing response to Covid-19, and to bridge shortfalls in essential goods and services. Health Minister, Joe Phaahla says this will boost access to quality healthcare – and that in Gauteng, some of the money will be used to speed up the repair of the Charlotte Maxeke Hospital
9. A further R3.3 billion is allocated to absorb medical interns and community service doctors

For hospitality

10. FEDHASA (Federated Hospitality Association of Southern Africa) welcomed Godongwana’s announcement on the launch of government’s business bounce-back scheme, which is aimed at supporting businesses in distress owing to the pandemic. “This can potentially offer SMEs in the sector greater financial security as the industry continues with its recovery efforts,” says FEDHASA in a statement on its website.

The total support package through the bounce-back scheme is R20-billion. The scheme will use two mechanisms:

• Small business loan guarantees of R15 billion will be facilitated through participating banks and development finance institutions, allowing access for qualifying non-bank small and medium loan providers. This will be operational in March 2022
• By April 2022, Treasury plans to introduce a business equity-linked loan guarantee support mechanism

Godongwana concluded his budget speech, stating, “… you will note that we have not increased taxes in the major revenue generating categories, such as personal income tax, VAT, and the general fuel levy. We have reduced the corporate tax rate and broadened the tax base.  However, let me restate my earlier caution, that if there are permanent expenditure increases in the coming years, we would have no choice but to revisit this to ensure the fiscal deficit does not worsen.”