Budget Speech 2023

On Wednesday, Finance Minister Enoch Godongwana delivered his 2023 Budget speech in Cape Town, South Africa. While there were no major surprises, the speech did include some important announcements that will affect South Africans’ lives and the country’s economy in the coming year.

One of the biggest announcements was the government’s initial Eskom debt relief plan, which will provide R254 billion in relief for the struggling power utility. This was expected, as Godongwana had already mentioned the plan in the 2022 mid-term budget speech in October. Additionally, the finance minister announced increased tax incentives for rooftop solar PV as a way to mitigate the impact of load shedding on households and the economy.

Another expected move was the increase in sin taxes, or excise duty on alcohol and cigarettes, “in line with expected inflation” at 4.9%. However, fuel levies have not increased for a second consecutive year, and the diesel fuel levy refund will be extended to foodstuff manufacturers for two years starting April 1, 2023.

There were no tax increases for individuals, but the government adjusted personal income tax brackets and rebates to account for inflation. Individuals will only pay income tax if they earn more than R95 750 annually. Social grants have also increased slightly below inflation, and the Covid-19 Social Relief of Distress grant has been extended until March 31, 2024. However, there was no announcement on a permanent Basic Income Grant.

The corporate income tax rate is reduced by 1 percentage point to 27%, effective for tax years ending on or after 31 March 2023.

The sugar industry will also be slightly relieved, with no hike in “sugar tax” this year. The minister said that the increase of the health promotion levy on beverages to 2.3 cents per gram of sugar is being delayed until April 1, 2025. Government has, however, not budged on the industry’s calls for the tax to be scrapped altogether.

In terms of the government’s solar PV tax support, a tax rebate to individuals for solar PV panels of 25% of the cost for a limited period was announced. This is subject to certain conditions and will be capped at R15 000 per individual.

On the fiscal front, the government’s consolidated budget deficit is expected to decline from 4.6% of GDP in 2021/22 to 4.2% in 2022/23 and reach 3.2% of GDP in 2025/26. Additionally, National Treasury’s GDP forecast for 2023 is 0.9%, which is more optimistic than that of the South African Reserve Bank’s latest forecast of 0.3%. Godongwana’s department expects SA’s 2024 GDP to come in at 1.5%, more than double that of the Reserve Bank’s estimate.

Overall, the 2023 Budget speech did not have any major surprises, but it did provide some relief for struggling industries and households and indicated some optimism for the country’s economic outlook. However, as with any budget speech, the impact of the proposed measures will need to be carefully monitored and evaluated in the coming months and years.