The sweet and sour sides of the budget…


The much anticipated 2016 Budget speech, delivered by Finance Minister Pravin Gordhan in Parliament last week, left South Africans with a lot to digest.

While many were relieved that personal income tax didn’t increase as expected, the talking points from the speech included the increase in sin taxes with increases of between 6% and 8.5%, in the duties on alcoholic beverages and tobacco products, the introduction of a sugar tax on sugar-sweetened beverages and introduction of a tire levy to finance recycling programmes.

“The budget rests on the idea of an inclusive social contract, encompassing an equitable burden of tax and a progressive programme of expenditures,” said Mr Gordhan last week.

Margot McCumisky, acting executive manager of Diabetes South Africa, said they are cautiously optimistic that the sugar tax will have a positive affect on the health of communities.

Ms McCumisky said diabetes, of which obesity is one of the main risk factors, is most prominent in the Western Cape.

“It (sugar tax) is a step in the right direction. However, it depends how it is initiated. They’ve done it in Mexico where they have seen a decrease in sales in fizzy drinks. But it is too early to tell if it will help stop obesity.”

According to Ms McCumisky, one in five South Africans consume too much sugar. The recommended daily intake is six teaspoons for women and nine for men. Consumption of just one can of fizzy drink can contain on average seven teaspoons of sugar, and will take up most or all of your recommended daily intake.

“Hopefully, the tax will reduce the number of fizzy drinks consumed and South Africans will consume more water, which is a far more healthy alternative,” said Ms McCumisky.

She said countries that have introduced a tax on sugary drinks have not only reduced consumption, they have raised much-needed revenues for public health measures.

“It would be great if the tax could be used to provide funding for organisations like Diabetes South Africa who receives no government funding, and who provide education and literature aimed at promoting healthy lifestyles and preventing diabetes and other non-communicable diseases.”

Ms McCumisky said the problem of obesity and diabetes had been overlooked by government for far too long and it has become a huge drain on the health care system.

The Cape Chamber of Commerce and Industry said the tax increases announced were modest in the circumstances so cost-cutting would have to be very effective if the budget deficit was to be reduced to 2.4 percent over three years.

Janine Myburgh, president of the chamber, added: “One of our biggest problems is the unsustainable cost of the public service and the promised cut-backs on recruitment, frills, travel, expenses and the use of cheaper motor vehicles will not be enough. We needed more dramatic measures to underline the importance of reducing costs and increasing the productivity of the public service.”

Mr Gordhan said in his speech that in view of the need to raise additional revenue and reduce the budget deficit, government has paid special attention to the fairness and inclusivity of the tax system. “We have also been mindful of the need to moderate the impact of tax increases on households and firms in the present economic context.”

Mr Gordhan announced that overall expenditure on social assistance will increase from R129 billion this year to R165 billion in 2018/2019.

Old age, disability and care dependency grants will rise by R80 to R1 500 in April, and by a further R10 to R1 510 in October.

The child support grant will rise by R20 to R350 in April and the foster care grant by R30 to R890.

Commenting on the social grant increases, life coach Chesna Alexander from Mitchell’s Plain, who will be hosting free, week-long financial workshop for pensioners, said additional income is always welcomed, but not necessarily helpful.

“There are cases where the help is useful, but there are just as many cases where those who are physically able to improve their own lives don’t.”

She also did not think pensioners were able to sustain themselves on R1 500. However, she added that this was the reality and they have to make do with what is currently available.

Considering that a vast number of people who benefit from these grants are unemployed, she cited ways to bridge the gap.

“Medication is generally free if they have folders with government institutes, although they wait really long at the clinics. In terms of dietary needs, they can reduce spending by having home-grown veggie gardens. There are NPOs in Mitchell’s Plain and Khayelitsha that help in educating and setting up gardens for individuals.

“Going back to baking bread instead of buying it is also a way to save cost. Clothing can be purchased at charity shops at very low cost or communities can have monthly ‘swop’ days, where everyone brings clothes and they swop it out.”

Looking at child support grants, Ms Alexander said she did not think beneficiaries should be given all of the money, instead proposing that a portion of it should maybe be paid directly to the child’s educare centre or school.

“I think that some of the funds for grants should not be money placed directly in their hands as it could be a disadvantage to them. Because many are not educated in financial management and working on households budgets, they don’t necessarily spend the money wisely.

“Social Development already has a record of who the beneficiaries are. Government could discuss with bankers to write off bonds for eligible pensioners who still have bonds as part of the banks’ Corporate Social Initiatives (CSI) projects.”

Speaking about the social cohesion necessary for economic and inclusive growth, Mr Gordhan said: “Let us chart a new course for the economy and well-being of all South Africans, particularly for those hardest hit by unemployment – the low-skilled and the youth.

“The joint actions we need will not always be easy. All too often, bureaucrats and business people speak past each other; the needs of the young are not the same as those of the elderly; the rhythms of the township differ from those of the suburb. Race, class and language differences interfere with progress, even when we have shared aspirations. We need to bridge these divides.”