All eyes and ears will be on Cape Town today as Finance Minister Enoch Godongwana presents the 2024 national budget.
Dr. Ridwan Asmar, Senior Researcher, Faculty of Accounting, Finance and Tax Management, Mancosa University
It is no secret that South Africa is facing difficult economic conditions, with austerity being the most commonly used term during budget planning. However, despite the dark clouds, Dr Ridwaan Asmal, a senior research fellow at Mancosa University's School of Accounting, Finance and Tax Management, points out that there may be some good news for South Africans in the final quarter of this year.
Revenue collection becomes a problem
What can South Africans expect from this year's budget?
Dr Asmal pointed out that revenue collection is expected to be R56.8 billion below the 2023 budget estimate. This will undoubtedly put Mr Godongwana under significant pressure, and he may need to consider introducing concrete austerity measures to deal with this. It further notes that National Treasury is already planning to propose tax measures in the 2024/25 budget aimed at raising R15 billion in additional revenue.
“However, as this is an election year, the ruling party will not want to confuse the apple cart and its voters by raising income taxes for lower and middle income groups, and also increase value added. We do not expect 'tax (VAT),' says Dr. Asmal.
education
What does this shortfall in revenue collection mean?
Over the years, various articles and reports have highlighted the growing crisis within South Africa's education sector. As ministers are forced to allocate funds to plug serious holes in the budget, certain sectors are forced to live with limited access to much-needed funding.
Dr. Asmal pointed out that in the 2023/24 national budget, the national budget allocation for education increased by 5.7%. However, education expenses are scheduled to increase by 7.2%, leaving a shortfall of approximately 1.5%. “This is a concern because most schools cannot afford to hire additional teachers.With high learner-teacher ratios, many public schools continue to have to deal with inadequate infrastructure. “No,” Dr. Asmal said, adding that these challenges will continue. In higher education, higher education institutions admit large numbers of students who may not be adequately prepared for the demands that come with higher education.
Of particular concern is that students begin their journey into higher education with varying levels of technical skills, a challenge Mancosa has highlighted in the past.
“Pathways to high-value digital careers are too few, too late. Traditional education takes too long and provides sufficient opportunities for only a few thousand students a year. Providers like Mancosa who offer IT and Artificial Intelligence 'Intelligence (AI) Qualifications. This institution has worked hard to make its courses as accessible as possible to all South Africans.' Dr. Asmal points out.
Concerns about National Health Insurance
Since 2010, the focus has been on the development of the National Health Insurance (NHI). The ruling party strongly suggests that national insurance will be implemented in 2023. Right now, we're just finalizing what it will look like once it's implemented.
One of the fundamental concerns is the funding of the program.
“Proposals to eliminate the health care tax credit, re-emphasized in this year's budget, will lead to a reduction in disposable income for households. “The Ministry of Health reiterated that the medical tax credit should be ended and the funds should be redirected to the National Health Insurance Fund,” Dr. Asmal pointed out.
South African economist Dawee Root said it would be OK to remove tax breaks for contributions to the health system, provided general tax cuts offset this. He said there is a need for tax cuts on contributions to the health care system and on health care costs. Tax systems should be neutral, but tax credits are not.
Light of hope
With the tough economic environment in mind and the uncertainty surrounding National Health Insurance looming large, where is the silver lining?
Dr. Asmal noted that he expects governments to make a concerted effort towards the transition from analog to digital, so that telecommunications companies have enough bandwidth to build the necessary infrastructure. This would free up access to fiber optic connectivity for most South Africans. “Combining this with the growing interest in online learning platforms and the various business incubators offered by higher education institutions, we will see a focus on increasing entrepreneurship in the future. It will be a big step towards diversification,” Dr. Asmal points out. He added that the severity of the energy crisis could reduce towards the end of the year, which would be welcome news to all South Africans.
He added that Godongwana could pave the way for future policies to embed a savings culture in South Africa during the 2024 budget speech. Asmal further added that all rich countries became wealthy through minimal savings and investment. This was facilitated by appropriate policies and a savings culture. “As a rule of thumb, countries where savings exceed around 25% of GDP have significant quality of life benefits. Countries like Singapore and Chile are good examples of this,” Dr. Asmal points out.
This would be a welcome change from the dire spending news we are used to hearing from the nation's highest offices. Savings culture starts with political leaders. “However, given the headwinds facing South African consumers and the tendency for those headwinds to increase significantly from moment to moment, establishing this savings culture in the current economic environment may be difficult.” Dr. Asmal says:
There are many signs that South Africans should be concerned, but there is at least some hope that change may be on the way. “The role of higher education institutions has never been more important,” reiterates Dr. Asmal. “It takes strong leaders to implement the changes that our current leaders are laying the foundation for. Mancosa continues to work tirelessly to improve our future value proposition.” These leaders Yo. ”
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