Following last week’s National Budget Speech by Minister of Finance Tito Mboweni, the country first heaved a huge sigh of relief.
There were no painful new tax hikes, as many South Africans had feared. Instead, the minister increased personal income tax brackets by 5%, which effectively puts R 2.2 billion back in the hands of low-income earners.
Social development plans were also boosted, with small but welcome increases to social grants, old age, disability, and care dependency grants, among others. In addition, provinces across South Africa will receive R3.5 billion from the Department of Social Development to improve access to early childhood development services.
More hope was dispensed in the form of a R791.2 billion investment in driving infrastructure and the allocation of a further R10 billion to help small and township businesses establish themselves.
So, across the land, after a year of unspeakable doom and gloom, the Finance Minister helped hope to flicker into life again. But hope needs intensive nurturing and commitment. It does not succeed without gigantic effort, cautions John Manyike, head of Financial Education at Old Mutual.
Let’s get fit
“The Minister may have given us all a little jab of optimism, but unfortunately that does not mean the challenges and hardships are over. Some sectors of the economy, such as the public sector, still face uncertainty and setbacks in the form of unavoidable wage freezes, for instance. This means it’s now up to us, as consumers, to take steps to become financially much fitter and more resilient,” he says.
The tougher aspects of the budget include the petrol price hikes (fuel levies will increase by 27 cents per litre) and the 8% increase in the taxes on tobacco and alcohol.
With National Treasury sticking to its wage bill reduction targets in the public sector, pay progressions are being reconsidered, performance bonuses are already being phased out and headcounts will be reduced.
Job losses and redundancies in the overall economy will inevitably increase the rising rate of unemployment. In the recent Statistics SA South Africa’s Quarterly Labour Force Survey, the country’s official unemployment rate has increased to a record 32.5% as the number of jobless in South Africa grew to 7.2 million in the fourth quarter of 2020. Our 2020 Old Mutual Savings & Investment Monitor also made clear how vulnerable South Africans are: 40% of the working metropolitan households in South Africa will be out of pocket within one month of losing their jobs.
Recovery takes effort and commitment
Despite the balanced budget, the predicted economic recovery of just over 2% for 2021 will still leave the country struggling to make up for the losses incurred in previous years.
“We must accept that what Minister Mboweni is also messaging to us in no uncertain terms is ‘Vuka Mzansi’. The time is now to wake up to the financial realities and carefully review our own budgets. Don’t wait for tomorrow to shockproof your finances and plan ahead,” says Manyike. “Vuka today.”
10 ways to get financially fitter:
- Review your personal budget and adjust your immediate goals, if necessary, but don’t abandon your long-term dreams and financial plan. Discuss your approach upfront with your family to ensure they understand and support it
- Eliminate all unnecessary spending and accounts. Downscale your lifestyle if necessary
- Consider a free budgeting app like 22seven. It gives you an overview that helps identify saving opportunities and to track your spending
- Avoid buying or relying on credit
- Pay off your debts as soon as possible, starting with those that carry the highest interest or you can start with the small repayments and snowball into the bigger ones
- If you are struggling to repay your debts, consider consolidating your debts, so you only have a single account to pay off
- Start a side hustle to earn extra income
- Use any bonus or gift you receive to set up or increase an emergency fund or financial safety net, for unexpected expenses you have not budgeted for
- Don’t rush into financial decisions. Resist the urge to cancel policies, cash out savings or disinvest because of panic. Volatile markets tend to self-correct over time. This storm too shall pass.
- Grow your money by saving and investing wisely. Seek expert advice and peace of mind: speak to a trusted financial adviser.