Cape Town - Finance Minister Enoch Godongwana announced a significant takeover of Eskom’s debt, tax incentives for investing in solar panels, increases in social grants and a R13 billion tax relief, among other measures.
Godongwana delivered his 23-page Budget Speech at City Hall on Thursday amid a worsening energy crisis, a widely-felt cost-of-living squeeze, faltering state-owned entities, failing infrastructure and a myriad other crises.
He outlined the performance of the country and the global economies and said prevailing conditions forced the government to maintain “a prudent fiscal stance”.
Godongwana announced a R254bn debt take-over of Eskom’s R400bn debt, which is peppered with conditions.
The Eskom debt relief will ease the pressure on the energy company’s balance sheet, which will give it room to deal with the financial aspects of load shedding, including financing maintenance and laying the infrastructure for the company’s restructuring process.
Godongwana said the debt relief comprised two components: one is R184bn, which is Eskom’s full debt settlement requirement in three tranches in the medium term; and two, “a direct take-over of up to R70bn” of Eskom’s loan portfolio in 2025/26.
Because of the way the debt relief is set up, Eskom “will not need further borrowing during the relief period”, Godongwana said.
“Government will finance the arrangement through the R66 billion baseline provision announced in the 2019 Budget, and R118 billion in additional borrowings over the next three years,” he said.
Godongwana’s “strict” debt relief conditions for Eskom include:
- Eskom has to prioritise capital expenditure in transmission and distribution during the debt relief period.
- Eskom has to focus on maintenance of the existing generation fleet to improve availability of electricity.
- The debt relief will only be used to settle the company’s debt and interest payments.
- And that Eskom implement the recommendations emanating from an independent assessment of its operations, which has been commissioned by the National Treasury.
Municipalities owe Eskom in excess of R56.3bn.
Godongwana said Treasury couldn’t ignore this as it would be “counter-productive” to commit to a debt relief programme without addressing the municipal debt.
However, he said Treasury and Eskom had conjured up a solution which would see Eskom provide incentivised relief to municipalities which had unaffordable debt – but this also comes with caveats.
This relief will come with the installation of prepaid meters “to correct the underlying behaviour of non-payment and operational practices” in municipalities.
IFP MP Mkhuleko Hlengwa said Godongwana had “very little room to manoeuvre”.
His speech was “safe” ahead of an election year and largely referred to presidential initiatives.
A pessimistic COPE leader, Mosiuoa Lekota, said a lot of the plans were being made on guessing that “maybe there might be money there”.
Political commentator Khaya Sithole said he was disappointed that Transnet didn’t feature prominently.
DA MP and deputy spokesperson on Treasury Ashor Sarupen welcomed the announcements about no increases on taxes, but criticised Godongwana for giving the poor only “platitudes”.
Godongwana dished out R66bn for Social Development, with 50% of it to be used to fund the extension of the Covid-19 social relief of distress grant until March 2024, while R33 billion will be used for inflationary increases for other social grants.
Old-age and disability grants increase by R90 and will go up to R2 090 by October, while child support grant ticks up by R30 by October, and foster care grant rises by R30, also by October.
Health gets R23bn; basic education, R22bn; and R14bn for the fight against crime and corruption.
Although he went on a long monologue about wage negotiations, he said he didn’t want to “pre-empt” discussions with labour.
His tax incentives “encourage” businesses and individuals to buy into renewable energy, where businesses would reduce their taxable income by 125% of the cost of investing in renewables by March 1.
For two years, he said, there would be no thresholds on the size of qualifying projects.
Godongwana said individuals who installed rooftop solar panels will be able to claim a 25% rebate on the cost of the panels, with a cap of R15 000, until 2023.
On infrastructure, Godongwana said government was projected to spend R903bn over the medium-term, with the biggest piece of the pie – estimated at R448bn – going to state-owned companies, public entities and public-private partnerships.
Because the revenue collection is R6bn higher than estimated at his mini-budget in October, he made no major tax proposals, and instead adjusted the personal income tax brackets fully for inflation, and increased the tax-free threshold from R91 250 to R95 750.
Sin taxes received no love as smokers and drinkers were slapped with increases for their vices.
A 340ml beer can will cost 10c more; 750ml wine bottle increases by 18c; and, a 750ml bottle of spirits shoots up by R3.90.
Meanwhile, a 23g cigar increases by R5.47. Cigarette smokers will fork 98c more for a packet of 20.