Budget 2021: Basic income grant (BIG) on the cards?

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South African businesses and consumers will be looking to Tito Mboweni’s Budget 2021 Speech for answers to concerns about COVID-19, higher taxes, the basic income grant (BIG) for the poor, load-shedding, policy uncertainty and for inspiration on the government’s approach to economic recovery. 

According to a PWC report entitled “South Africa’s economic outlook What can Budget 2021 do to help?” businesses and consumers will be hoping for some clarity regarding the following seven points.  

“The following information as verification of successful government efforts could boost business confidence and subsequently, investment spending,” PWC said.

Here are here the first five points Budget 2021 should cover

1. Update on structural reforms under Operation Vulindlela 

Government’s promise of substantial structural reforms to boost the economic competitiveness of the country has still not materialised. Operation Vulindlela was launched in 2020 to implement urgent reforms and monitor progress on key priorities. What progress has been made? 

2. Cheap working capital loans for start-ups 

The Economic Reconstruction and Recovery Plan promises working capital loans at 0–2% interest to assist firms during their start-up phase. The aim of this endeavour is to introduce small, medium and micro enterprises (SMMEs) into the value chains of our economy. How will this initiative be funded and who will benefit from it? 

3. Progress in securing private investment for the state’s Investment Fund 

The Government established this fund as a vehicle for attracting private sector investment into public sector infrastructure spending. However, little detail has been provided on the instruments available to attract investment and the value of commitments received so far. Has the private sector come to the table with investment? 

4. Report on the success in allocating 40% of public procurement for women 

The economic recovery needs to not only be sustainable and job-intensive, but also inclusive. The Economic Reconstruction and Recovery Plan re-committed to an earlier goal of setting aside 40% of public procurement spending to female owned businesses. Has this been achieved? 

“By reporting on these points, Budget 2020 would boost confidence in the private sector of Government’s ability to address constraints on private sector business activity, specifically structural impediments to growth, access to finance, support for employment creation, as well as public-private cooperation,” PWC said.

Consumers want Tito to clarify basic income grant plan

5. Potential increases in personal income tax rates 

The Medium-Term Budget Policy Statement (MTBPS) announced that tax increases will be implemented in the 2021/2022 fiscal year to raise an additional R5 billion in revenue. Personal income tax rates are the likely target, including a so-called ‘wealth tax’ on high-net-worth individuals (HNWIs). Will a wealth tax be implemented or could the increase in personal taxes be more broad-based? 

6. Comment on suggested basic income grant 

The ANC resolved in January 2021 that the state should develop a policy framework to introduce a basic income grant. Will the Government act quickly, given the current economic climate and the recent end to temporary unemployment benefits?

7. Extension of R350 Special COVID-19 Grant 

Payment of this grant has been suspended and restarted more than once and it was announced in SONA 2021 that it would extended for another three months. While it has been a lifeline for millions of households, this short-term back-and-forth – will it continue, or won’t it? – creates uncertainties. Is National Treasury budgeting for an extended roll-out of the R350 grant in the 2021/2022 fiscal year?

Boost consumer spending

“Consumers want certainty about their income prospects, including the minimum wage and personal income tax rates.  The BER/FNB Consumer Confidence Index jumped from a reading of -23 in the third quarter of 2020 to -12 in the fourth quarter. However, this was still below the long-term average of -2, and the lowest festive season reading in five years,” PWC noted.

“Overall consumer sentiment was net negative, indicating that consumers are concerned about the future.”

PWC said that by answering these pertinent questions the government would verify its efforts to support consumers and so boost consumer confidence and their approach to spending.

READ: Budget 2021: High earners could be hit with higher taxes next week

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