This was reckoned to be one of the most difficult budgets of the last century. The deficit between tax revenue and spending of close to 16%, and one for the record books.
Gross tax revenue for the 2020/21 fiscal year is revised down from R1.43 trillion to R1.12 trillion – a shortfall of more than R300 billion.
Part of this shortfall is due to delays in tax collections of about R44 billion.
What does this budget mean for accountants?
There were a few stand-outs in the Budget:
- The Economic Support Package of R100 billion intended to assist job creating businesses – these will need accountants to prepare documentation and applications once further details are available
- The President’s job creation and protection initiative will be rolled out over the medium‐term. It will include a repurposed public employment programme and a Presidential Youth Employment Intervention. In this year, an amount of R6.1 billion is already allocated, and a further R19.6 billion has been set aside mainly for this purpose. This is an opportunity for SA Institute of Business Accountants (Saiba) members to make sure their clients are front of the queue.
- The UIF payout to income-distressed workers was R51 billion since the start of the lockdown. Discussions are still underway at the National Economic Development and Labour Council (Nedlac) regarding the extension of Covid-19 TERS programme past 16 September 2020. This will require ongoing support from accountants to ensure affected workers receive their payments, should the programme be extended.
- Now that the country as moved to Level 3 lockdown, most of the economy is open for business. “We must help businesses to get moving!” implored Mboweni. The government-backed loan guarantee scheme also includes a business restart option for businesses needing support to get up and going after the lockdown. This will apply to all businesses including those with turnover of more than R300 million. Applications for the loan guarantee scheme will require the support of accountants in loan application preparation.
- The need for business turnaround skills will be crucial if Mboweni’s vision is to succeed. Make sure to get yourself trained in this. Saiba is the only professional body offering a specialist business rescue specialist licence. Find out more here.
- The introduction of zero-based budgeting is a positive move, and will initially focus on large projects. This is an area where specialised expertise will be required from expert accountants.
- The launch of an ambitious infrastructure spending. The Government has already committed R100 billion over ten years toward the Infrastructure Fund, though Mboweni sees the private sector playing a key role in this. For this to happen, structural reforms will be needed, such as relaxation of labour laws and throwing open the doors of opportunity to private investors. This is another area where accountants’ skills will be required.
Overall, the deficit for the current fiscal year will come in at about R760 billion., versus the R370.5 billion projected just a few months ago in February 2020.
That means that we expect to miss our tax target for this year by over R300 billion.
Tough budget, but not one without opportunity
It was a tough budget in a bleak year, but without pockets of hope. There was negative reaction to the continued bail-out of SAA and other state-owned companies, and serious questions are being asked as to whether government can reduce the public sector wage bill as promised (it has been rising at an average 7.2% a year for the last five years).
One thing is certain: accountants will have to play a leading role in the economic recovery, and need to put themselves front and centre as enablers of this recovery.