A simple guide to understanding how your finances are impacted by Minister Enoch Godongwana's budget speech.
Image: Freepik
Yesterday, Finance Minister Enoch Godongwana delivered his much-anticipated Budget Speech.
The revised speech, which was presented before and accepted by Cabinet, faces much opposition regarding the proposed Value Added Tax (VAT) increase and other factors.
But for the man on the street, unfamiliar with technical jargon like 'fiscus' and the like, you're wondering how the proposals made in Godongwana's speech will directly impact your wallet.
Chief Risk Officer at Standard Bank, Thabani Ndwandwe gives a simple and easy to understand breakdown of how your money matters will be impacted.
Ndwandwe explains that for you, this means items that you buy every day will become more expensive.
"This ranges from electricity and clothing to transport and personal care products. While basic food items remain VAT-exempt and more items were added to VAT- exempt, the reality is that many essentials will see price hikes, adding further strain to household budgets," he said.
He added that this will affect both low and middle-income earners. He said a bigger cut will come from the poor rather than the rich as VAT is a regressive tax.
According to Ndwandwe, while there is no direct increase in personal income tax, government has not adjusted the tax brackets for inflation.
Basically this means that even though your salary will increase, you may not see the change in your take home pay.
"As salaries rise due to inflation, many South Africans will be pushed into higher tax brackets, effectively paying more tax without actually earning more in real terms," he said.
So those middle-income and working among us will be hit the hardest.
Thabani Ndwandwe, Chief Risk Officer, Standard Bank
Image: Supplied
Motorists can breathe a sigh of relief here as the general fuel levy and Road Accident Fund (RAF) levy will not increase for another year, this is thanks to a freeze that was introduced in 2022.
"This move provides around R4 billion in tax relief, preventing an even bigger fuel price hike," Ndwandwe said.
Going out for a drink or a pack of smokes just got a bit more costly.
A breakdown of the sin tax increases
Image: IOL
"The government justifies these increases as a public health measure while raising revenue. However, for consumers, this means that drinking and smoking will take an even bigger chunk of their budgets," Ndwandwe added.
Essentially, those collecting monthly grants may not be able to keep up with food inflation, despite a slight increase. Ndwandwe said this means those millions of South Africans on grants, will still struggle to afford essentials.
R19.2 billion of the budget is being allocated to the Passenger Rail Agency of SA (Prasa) to improve train services with an additional R11.8bn going to infrastructure projects.
Ndwandwe said if government is able to efficiently manage these funds, passengers can benefit from cheaper transport options.
"However, given past mismanagement of infrastructure budgets, accountability will be key to ensuring that South Africans see improvements," he said.
Ndwandwe said given the changes South Africans need to look at adjusting household budgets, take advantage of tax-free savings accounts, medical aid deductions, and retirement contributions to reduce taxable income, monitor fuel costs and make some serious lifestyle changes.
"While the government has made some strategic investments, this budget largely increases the financial burden on South Africans through higher VAT, unchanged tax brackets, and rising sin taxes.
"For the economy to grow sustainably, South Africa must prioritise job creation, economic growth, and efficient public spending—or risk placing even greater strain on consumers in the years ahead," Ndwandwe said.
seanne.rall@iol.co.za
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