ECONOMIC AND MARKET OVERVIEW
FEBRUARY IN REVIEW
South Africa’s President, Cyril Ramaphosa, and his Minister of Finance, Enoch Godongwana, delivered the State of the Nation address and budget speech respectively.Notable observations following the budget speech were:
- The 2024 Budget proposals indicated no increase in tax rates in any category other than excise duties. The revenue gap is being addressed with the finance minister choosing to raise additional personal income tax. This is achieved by not adjusting the personal income tax brackets (commonly referred to as bracket creep), rebates, and medical tax credits for inflation. Additionally, above-inflation adjustments are being made to excise duties for alcohol and tobacco.
- Two-pot retirement system set for 1 September 2024 – From the implementation of the two-pot system, all contributions to retirement funds will be split into two components. One-third of the contributions will be credited to a “savings component” and the remaining two-thirds to a “retirement component”. The main idea is to promote the preservation of retirement fund savings until retirement, while also providing investors with access to savings in times of need. It is estimated that R5 billion will be raised in 2024/2025 due to tax collected as fund members access once-off withdrawals.
- Global minimum corporate tax to be implemented – South Africa will implement a global minimum corporate tax of 15% from 1 January 2024, in line with the Organisation for Economic Co-operation and Development’s base erosion and profit-shifting framework. The introduction is expected to increase corporate tax collection by R8 billion in the 2026/2027 tax year.
Joe Biden and Donald Trump are leading their respective party nomination races and are likely to face each other in the US Presidential election in November this year.
