By Richard Halsey
The Budget Speech 2018 attempted to be a balancing act, but it remains to be seen if it will be successful in stimulating progress while shielding low income households. In the full budget review there are some positive messages for the energy sector that will hopefully drive positive change.
It seems that a primary motivation for increasing a number of taxes (value added tax, personal income tax, estate duties, excise duties and fuels levy) is to fund the objective of fee-free higher education. While the taxes that apply to luxury items – alcohol/tobacco or wealth taxes – can be seen to promote healthier living with limited effects on essentials required by low-income households, the increases in VAT and the fuel levy affect everyone. To counter this there has been provision for above average increase in social grants, but not all low income households actually receive these. Zero-rated basic food items remain unchanged.
For low income households there is the prospect of a reduced barrier of entry to higher education but slightly increased living costs. Of course the number of places available in tertiary institutions in unlikely to increase dramatically in the short term, so the benefit will be limited to a small percentage of the population with raised living costs across the board.
In the speech, it was also announced that the Carbon Tax would be implemented from the 1 January 2019. While this may sound like a step to leverage environmental reform, unless there are dramatic changes, the carbon tax in its current form is essentially toothless as there are so many exemptions and ways to get out of paying amounts that would actually be a deterrent for big business. Essentially then, this is a bit of moot point.
The difficulties at Eskom and the controversies around a nuclear deal have been of great concern in recent years. Both could sink the economy, so their role in the budget is critical. While nuclear is not mentioned at all in the Budget Speech, in the full Budget Review it is stated that: “The nuclear procurement plan should not be pursued at the expense of the financial sustainability of Eskom and the country.” The nuclear lobby will no doubt react to this, claiming that it is actually not that expensive, but all the modelling by respected local and international institutions shows that new nuclear is not part of a future least cost energy mix. Regarding Eskom itself, it is encouraging to see that: “Eskom’s business model will also have to change as part of broader transformation in the electricity sector”. This is long overdue, as a fossil fuel based monopoly in the electricity sector is not what South Africa needs. We need a just transition to a distributed, renewable energy based electricity system which will not happen if Eskom stays the way it is. It will be hard work to change an entrenched entity like Eskom, but it must be done.
The speech ended with an encouraging commitment to “open budgeting” and transparency around national finances. There was also mention of online platforms to allow citizens to engage more on these issues. If indeed efforts are made to “to build an active citizenry that engages in discussions that are meaningful, together with government, regarding service delivery and policies that affect every citizen”, then it is our duty to make use of those. The budget affects all of us, so we should take all opportunities to have our say.
