Budget 2024: African Bank applauds Treasury's economic recovery efforts

Johannesburg - African Bank commends the Treasury's proactive measures aimed at navigating South Africa toward economic prosperity, as outlined in the 2024 budget speech delivered earlier this week. The budget, marking the sixth review, reflects a concerted effort to address prevailing economic challenges and foster sustainable growth.

Anbann Chetti, Group Chief Financial Officer at African Bank, stated: "Despite the multifaceted challenges confronting the South African economy, including infrastructure deficiencies and reduced commodity revenues, efforts are underway to stimulate economic revitalisation."

Finance Minister Enoch Godongwana's decision to refrain from increasing taxes amidst mounting pressure to stabilise government finance was noted. There were no significant adjustments to VAT, the introduction of a wealth tax, or changes to fuel and Road Accident Fund levies for the third consecutive year.  “This decision was likely to protect consumers, however, it necessitated other strategic measures to address government financial constraints, which may cost consumers indirectly in other aspects” Chetti elaborates. 

In addition, Godongwana accessed South Africa's Gold & Foreign Exchange Contingency Reserve Account (GFECRA) for the first time in two decades. This initiative aims to manage debt effectively. “Considering our high debt-to-GDP ratio I think the decision not to raise tax was a wise one. It’s similar to managing your personal finance, you want to minimize the debt and maximise income” Chetti adds.

Acknowledging the ongoing challenges faced by small businesses in rebuilding post-pandemic, African Bank, through its Business Banking arm, reaffirms its commitment to supporting entrepreneurship and encouraging economic resilience across communities. ‘One area I think the budget speech could have focused more on is supporting SMMEs. As we’ve seen with corporate tax cuts, reducing burdens on businesses helps address challenges like electricity and logistics. Traders without electricity can't operate, and transportation issues hinder delivery of goods.

This hurts both businesses and consumers. To stimulate both the economy and government revenue, it is imperative to promote the growth of SMMEs. African Bank is actively expanding its business banking services with the intention of contributing to economic growth. In light of the challenging times, it's essential for individuals to save. To support this effort, consumers can access African Bank's investment accounts, tax-free saving accounts, and our Audacious rewards program. Enabling consumers to save money by redeeming or purchasing items such as electricity, offering practical solutions for tightening budgets.Chetti continues.

Other notable highlights included:

Medical Scheme Tax

Another big win for consumers is the medical scheme tax credits that have not been raised and persist at the 2023-24 levels of R364 for the first two individuals covered by a medical scheme, and R246 for each additional dependent.

Property Transfer

The property transfer duty table brackets remain unaltered, offering no extra encouragement to buyers, and properties valued below R1.1 million remain exempt from the tax.

Fuel 

Furthermore, there will be no upticks in the general fuel levy, resulting in approximately R4 billion in tax relief, while the accident fund levy and customs and excise levy will also remain steady.

Sin Tax

The budget outlines an increase in excise duties on alcohol from 6.7% to 7.2%, and tobacco product duties will rise from 4.7% to 8.2%.

Additionally, two significant reforms will be introduced: the two-pot retirement system and the minimum corporate tax rate. 

“As South Africa charts a path toward recovery, African Bank despite the budget speech provoking much debate, remains hopeful and dedicated to collaborating with stakeholders and driving initiatives that promote inclusive growth and financial stability” concludes Anbann Chetti, Group Chief Financial Officer at African Bank.

“While the budget has sparked varied responses, as African Bank, we remain optimistic about South Africa’s economic prospects. We are committed to continually working alongside - our people - government, businesses, and communities to drive inclusive growth and build a sustainable future. Through our financial services, we will continue to empower entrepreneurs and SMMEs, the backbone of our economy” concludes Anbann Chetti, Group Financial Officer, African Bank.