WHAT is in this Budget matters less than what is not. Its greatest virtues are four days less tax, no National Health Insurance (NHI) and liberated electricity markets.
The Budget does not, for instance, provide for two huge burdens promised by the government - the draft electricity plan (IRP2023) and the so-called NHI, which would, paradoxically, prohibit insurance.
The Budget subtext is that government-funded electricity and NHI will never happen. Healthcare will remain roughly as is, and there will be electricity supply competition.
The Budget’s single greatest accomplishment is that Tax Freedom Day (TFD) will be four days earlier. In other words, the government will consume 35.8% of the nation’s wealth (GDP) compared with 36.7% last year.
TFD indicates for how much of the year people effectively work for the government before starting to work for themselves.
In 1996 the average person can be thought of as having worked for the government until 20 April. The last Budget hypothetically had us working for the government until 14 May. This year average South Africans will in effect keep what they earn from 10 May.
The proportion of wealth taken by the government has grown at an annual anti-prosperity rate of 0.33%, which is the equivalent of 1.2 days per year since 1996. That TFD will be significantly earlier this year, that there will be no NHI, and that there will electricity markets, could signal the country’s desperately needed U-turn from stagnation to prosperity.
In a pre-Budget article I wrote that markets respond enthusiastically to positive signals. As predicted, the rand strengthened instantaneously. The way to treat our economy in ICU is now obvious to everyone.
The Budget offers much to celebrate and lament. Its score on balance is a welcome seven out of 10. Finance Minister Enoch Godongwana resisted tax-and-spend election year temptation. He has not increased tax rates.
The lower aggregate tax take as a proportion of the economy (GDP) is more important than nominal tax rates, a few of which have been increased slightly.
There was much speculation on whether the minister would increase VAT. That he did not do so is another virtue. That allows beleaguered consumers, especially poorer citizens, to breathe a sigh of relief.
It has become customary for the government to boast about how much welfare it provides. That 19 million people need welfare is a national disgrace.
Instead of promising more welfare, which he did, the government should reduce the need for welfare by adopting pro-prosperity policies. Anti-poverty policies make it easier for people to employ and be employed.
They maximise self-employment, the right to own their own homes and shacks, and to manage personal affairs without prohibitive Financial Intelligence Centre Act (Fica) controls. Since Fica controls provide no financial “intelligence” they should be abolished.
All Budget speeches lament the unemployment catastrophe and promise more of what has already failed repeatedly. As before, the fundamental human right to work was not announced.
Our destitute millions, predominantly young black women, should be liberated to take whichever jobs they wish. Anti-employment minimum wage laws, for instance, do not enforce high instead of low wages, but no instead of low wages. Employment prohibitions are inhumane measures that benefit privileged people with jobs at the expense of the jobless.
Another customary Budget item is the promise of pro-market policies for economic growth, investment and freedom. As always, all government departments do the opposite of what Treasury promises.
The Parliament in which the minister spoke always has before it a tsunami of anti-market measures. The annual mismatch between Budgets and the reality of legislative diarrhoea should be recognised and condemned in Budgets, and subjected to properly conducted socio-economic impact assessments.
To their credit, Budget analysts invest much time and expertise in detailed examination of how the Budget will impact individuals and firms, and what is implied for specific markets.
In this Budget, there is virtually no disruption at the sectoral and micro level, which explains the inclination to regard it as largely inconsequential.
At the national level, however, if it is fundamental rather than electioneering, it will be looked back on as a welcome reversal of past wrongs. If sustained, its projected benefits and low growth rates will be exceeded.
Leon Louw is a South African intellectual, author, speaker and policy advisor. He is CEO, Freedom Foundation and Izwe Lami, a policy think tank and research organisation.
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