In his Budget Speech on 22 February, South Africa’s Finance Minister Enoch Godongwana emphasised that the 2023 Budget is being tabled in a difficult domestic and global economic environment.
WATCH : Tax hacks for property.
“The global recovery is slowing. Domestically, load-shedding has become more persistent and prolonged, impacting service delivery and threatening the survival of many businesses.
“This is compounded by disruptions to freight and logistics networks. Households are under pressure from the rising cost of living, and unemployment remains stubbornly high,” he said.
“We are navigating this difficult environment with policies that support faster growth and address fiscal risks. Our pursuit of higher growth remains anchored on three pillars:
- Firstly, we are ensuring a stable macro-economic framework to create a conducive environment for savings, investment and growth.
- Secondly, we are implementing growth-enhancing reforms in key sectors, particularly in energy and transport.
- Thirdly, we are strengthening the capacity of the state to deliver quality public services, invest in infrastructure and fight crime and corruption.
“In this Budget, we are allocating additional resources towards these endeavours without compromising the sustainability of public finances.”
Positives
From a property perspective, there were quite a number of positives in the 2023 Budget speech. These include:
- The raised threshold for transfer duty on property from R1 million to R1.1 m.
- Incentives for households and businesses to invest in renewable energy.
- The extension of the diesel subsidy for generator operation to food manufacturers. Which should also help to keep food price increases down.
- Increased spending on infrastructure and the implementation of many large projects that will provide many jobs and improve the living conditions in many towns and cities, making them more attractive to residential and corporate property investors.
- Increased spending on the police service and anti-corruption measures. This will help over time to reduce SA's very high crime rate and the effect that it has on consumer confidence and willingness to invest in local property.
- The plan to restructure and rationalise the public service, which Treasury estimates will save taxpayers some R27bn over the next three years.
Negatives
Some negative aspects of the Budget that could limit property demand and prices in the short to medium term include:
- Government's decision to take on more than half of Eskom's current debt at a cost of R254 billion to SA taxpayers. This money could otherwise have been spent on economic expansion and desperately needed job creation. At present, GDP growth is expected to reach 0.9% this year and average 1.4% over the next three years.
- The projected increase in government's total debt is from around R4.7 trillion to around R5.8 trillion over the next three years. This makes South Africa more vulnerable to external and internal economic shocks and, therefore, less attractive to investors.
Industry comment
Dr Andrew Golding, chief executive of the Pam Golding Property group, says the announcement that the threshold for transfer duty payable will be increased by 10 per cent is welcome news for aspirant home buyers. This means the first R1.1 million of any property purchase price is tax-free.
“The introduction of tax incentives to encourage businesses and individuals to invest in renewable energy and increase electricity generation is also welcome. However, this incentive is only available for one year, and only 25% of the investment is claimable, up to a maximum of R15 000 of the overall cost. Unfortunately, the cost of installing rooftop solar panels is beyond the reach of most South Africans.
“We would have liked to have seen tax relief measures further extended to individuals having to invest in a range of additional measures to alleviate the burden of load shedding. These include gas stoves, generators, inverters, UPS devices, surge protection devices, battery-powered LED lighting, the costs of purchasing and running generators, batteries – including those utilised for security purposes, and the like. Surely such items, which carve a chunk out of household disposable income and which have become a necessity - amid the National State of Disaster declared for the energy crisis - should be considered for tax relief for financially over-burdened consumers.”
Berry Everitt, chief executive of the Chas Everitt International property group, welcomes the R13 billion worth of tax relief for individuals and businesses, including increased tax thresholds for personal income tax and no increases in the general fuel tax or road accident fund levy.
“The tax-free lump sum that retirees can claim has also been increased to R550 000. This will put more money in the pockets of consumers who are struggling with the increased cost of living and ease the financial pressure on many existing homeowners.
“Another positive is that for the next year, households will be able to claim a rebate of 25% of whatever they spend on solar panels, capped at R15 000. We hope a similar rebate will be introduced in future for storage batteries, which are generally the most expensive components of domestic solar power systems.”
Gerhard Kotzé, managing director of the RealNet national estate agency group, applauds the two-year incentive for small businesses to invest in renewable alternative energy generation.
“They can reduce their taxable income by 125% of whatever they spend to generate their own power in this way, and there is no limit at this stage. Even more, government is providing guarantees on Bounce Back loans that will make it easier to obtain bank finance for their installations.
"We foresee that this will lead to the creation of significant extra capacity by businesses, which could then all be fed back into the national grid to help relieve the current shortfall of 4000 to 6000MW and end load shedding.
Lew Geffen Sotheby’s International Realty chief executive, Yael Geffen, says this year’s budget has offered some much-needed relief to citizens, but this could all be undone if Eskom doesn’t come to the government’s bailout party.
“Given Eskom’s entrenched culture of corruption and mismanagement, the Treasury cannot be permitted to give R184 billion of taxpayer money directly to Eskom to service debt. That money belongs to the people of South Africa, and we have the right to demand that the government acts in a fiscally responsible manner.
“If the finance minister wants South Africans to assume R254 billion of Eskom's debt, then the government should be responsible for ensuring that the money is spent responsibly. Our economy cannot sustain another 207 days of load shedding this year. It's make or break time for Eskom, and the government needs to hold Eskom and itself accountable to the citizens of South Africa."
Writer : Sarah-Jane Meyer