South Africa Budget Speech 2024: A round-up for businesses

As a small or medium business owner, or perhaps an accountant navigating the complex terrain of fiscal policies, you’re acutely aware of how Budget announcements can ripple through the foundations of your operations.

The South African Budget Speech for 2024, delivered on 21 February 2024, is no exception.

With the country’s economy facing its unique set of challenges and opportunities in a critical election year, 2024’s Budget is particularly significant for businesses striving to adapt and succeed in an ever-evolving marketplace.

This article aims to distill the essence of the 2024 Budget Speech, focusing on the outcomes most pertinent to you—the business community.

From potential wage rises and support mechanisms for businesses to tax measures and new government initiatives, understanding these developments is crucial. More importantly, it’s about recognising the actions you might need to take in response to these changes.

So, whether you’re steering a small enterprise through the choppy waters of the South African economy or managing the accounts of a mid-sized firm looking to expand, the insights provided here are tailored for you.

This round-up of the 2024 Budget Speech will not only highlight the key outcomes relevant to your business but also guide you through the necessary steps to align with or benefit from these fiscal policies.

Are you ready?

Then let’s embark on this journey through the 2024 Budget Speech, with a lens focused on empowering your business in these transformative times.

By the end of this article, you’ll have a clearer understanding of what the Budget means for your business and how you can navigate the year ahead with confidence and strategic foresight.

Economic outlook

The 2024 South African Budget Speech, set against a backdrop of global economic shifts and domestic challenges, paints a detailed picture of the road ahead for the nation’s economy.

This section delves into the economic outlook as outlined in the Budget Speech, highlighting the global and domestic forecasts that will inevitably shape the business landscape in South Africa over the coming year.

Globally, the economy is expected to see a modest uptick, with growth projected to increase slightly from 3.1% in 2024 to 3.2% in 2025.

This gentle rise in global economic activity is primarily driven by growth in the US and several large emerging economies. However, this optimistic scenario is tempered by potential volatility in the global oil market and the uncertain economic trajectory of China, South Africa’s largest trading partner. These factors introduce a degree of risk that could sway the global economic outlook.

Domestically, South Africa’s near-term growth prospects are constrained by several factors, including lower commodity prices and structural constraints within the economy itself.

Real GDP growth for 2023 was revised downward to 0.6%, a slight decrease from the 0.8% growth estimated during the 2023 Medium-Term Budget Policy Statement (MTBPS).

This adjustment reflects weaker-than-expected outcomes in household consumption and fixed investment, underscoring the fragility of the domestic economic recovery.

Looking forward, growth between 2024 and 2026 is projected to average 1.6%, buoyed by the anticipated easing of power cuts as new energy projects come online and lower inflation supports household consumption and credit extension.

Despite these positive indicators, the growth forecast is hedged with risks, including persistent electricity supply issues, inefficiencies in freight rail and ports, and a high sovereign credit risk.

Economic challenges and opportunities

The Budget Speech articulates a clear vision of the challenges and opportunities that lie ahead for South Africa.

On the challenge front, the primary concerns include the ongoing energy crisis, which has been a significant drag on economic activity, and the structural reforms needed to address inefficiencies in state-owned enterprises and critical infrastructure sectors.

However, within these challenges lie opportunities for growth and development.

The government’s commitment to structural reform, particularly in electricity, logistics, and telecommunications, opens up new avenues for investment and innovation.

The focus on renewable energy projects and the liberalisation of the energy market are particularly promising, offering potential for sustainable growth and job creation.

Furthermore, the introduction of measures to improve the business environment, such as tax incentives for investment and support for small and medium-sized enterprises (SMEs), presents opportunities for businesses to expand and thrive.

The emphasis on infrastructure investment and the digital economy also points to long-term growth prospects that businesses can leverage.

Key Budget outcomes for businesses

Tax adjustments

The 2024 Budget Speech outlined several fiscal strategies without detailing specific changes to corporate income tax rates or direct enhancements for small businesses.

Key focuses include revising revenue projections upward by R45.6 billion and addressing a tax revenue shortfall of R56.1 billion from the previous estimate.

The speech introduced measures to raise an additional R15 billion in the 2024/25 fiscal year, aiming to alleviate fiscal pressures and support debt stabilisation.

Notably, it includes not fully adjusting personal income tax brackets for inflation, potentially affecting consumer spending, and above-inflation increases in excise duties for alcohol and tobacco products, alongside environmental tax adjustments.

In an effort to curb the adverse impacts of tax competition globally, the South African government is set to implement a global minimum corporate tax in the coming years.

This initiative mandates that multinational corporations with annual revenues exceeding €750 million will be taxed at a minimum effective rate of 15%, irrespective of the location of their profit generation.

This significant reform is anticipated to boost corporate tax revenue by an additional R8 billion by the fiscal year 2026/27, aiming to create a more equitable tax landscape and prevent profit shifting and tax base erosion.

For businesses, these announcements underscore the need for strategic financial planning and consultation with tax advisors to navigate the impacts of broader fiscal measures.

Staying informed on further guidance from the National Treasury and SARS will be crucial for adapting to the evolving economic landscape.

New retirement reforms

The 2024 Budget Speech unveiled significant retirement reforms set to take effect on 1 September 2024, introducing a dual-structure system to retirement savings.

This innovative two-pot system allows for earlier access to a portion of retirement funds, dividing contributions into a ‘savings component’ and a ‘retirement component’.

For business owners, this reform presents a pivotal opportunity to provide employees with the flexibility to address immediate financial needs without compromising their long-term retirement security.

The ability to withdraw from the savings component starting September 2024, under favorable conditions, not only aids in financial planning but also enhances employee welfare and satisfaction.

Furthermore, the introduction of a once-off seed capital transfer offers a safety net for those facing financial emergencies.

With the reforms anticipated to raise an estimated R5 billion in tax revenue in the 2024/25 fiscal year, they underscore a strategic approach to balancing fiscal responsibility with individual financial flexibility.

For business owners, staying informed on these changes is crucial for advising employees and aligning benefits strategies to this new framework.

Additional Budget announcements

The 2024 Budget Speech unveiled several pivotal announcements, shaping not only the fiscal landscape but also the broader business environment in South Africa.

These developments span across infrastructure, education, and skills training initiatives, each bearing significant implications for your business operations and strategic planning.

They also underscore a broader strategy to stimulate economic growth, enhance competitiveness, and prepare the workforce for the future.

For you, staying abreast of these developments and understanding their implications is essential.

They not only affect your immediate business environment but also shape the long-term economic landscape in which you operate.

Here’s a closer examination of these announcements and how they might influence your business.

Infrastructure developments

A substantial allocation has been made towards infrastructure development, with a focus on improving the country’s roads, ports, and energy sectors.

The announcement of R47 billion towards Transnet’s recovery plan aims to enhance logistical efficiencies, directly benefiting businesses reliant on supply chains and export operations.

For you, this means potentially reduced transportation costs and improved access to markets.

Additionally, the government’s commitment to addressing the electricity supply crisis through a R2 billion conditional grant over the medium term to fund the rollout of smart prepaid meters signals a move towards more stable and sustainable energy solutions.

This development could lead to lower energy costs in the long run and presents an opportunity for businesses to invest in renewable energy technologies.

Education investment

The Budget Speech highlighted a significant investment in education, ultimately aiming to bridge the skills gap in the workforce.

An additional R25.7 billion has been allocated to the education sector for the carry-through costs of the wage increase over the medium term.

For businesses, this translates to a future workforce better equipped with the skills necessary for a modern economy.

Indeed, now is an opportune moment to engage with educational institutions and training programs to tailor skills development initiatives that align with your business needs. Collaborating on internships, apprenticeships, and training programs can ensure a steady pipeline of skilled workers ready to contribute to your business’s growth.

Leveraging public-private partnerships

The government has shown a renewed interest in fostering public-private partnerships (PPPs) as a means to accelerate infrastructure development and service delivery.

This approach opens new avenues for businesses to collaborate on government projects, offering a chance to influence and participate in major development projects directly.

For your business, exploring PPP opportunities could mean access to new revenue streams and a platform to showcase your expertise and solutions on a larger scale. It’s advisable to stay informed about upcoming projects and the government’s criteria for private sector participation.

What your business needs to do now

As a business owner or accountant, now is the time to take a proactive stance.

Here’s what you should do now:

• Review your business model and financial planning in the context of the 2024 Budget Speech.
• Assess the implications of tax measures, wage increases, and support mechanisms on your operations and financial health.
• Consider how the government’s investment in infrastructure and skills development can benefit your business in the long term.
• Seek out further resources and advisories to navigate these changes effectively.
• Engage with industry associations, financial advisors, and government agencies to gain deeper insights and practical guidance.
• Explore workshops, seminars, and webinars focused on budget analysis and business strategy adaptation post-budget announcement.

Ultimately, the 2024 Budget Speech has set the stage for a transformative period for businesses in South Africa. By staying informed, flexible, and strategic, you can navigate the challenges ahead and seize the opportunities presented by the new fiscal landscape.

The journey ahead may be complex, but with the right approach and resources, your business can thrive in the evolving economic environment.

Final thoughts

The 2024 Budget Speech has laid out a series of measures and initiatives that present both challenges and opportunities for businesses in South Africa.

Key takeaways include a range of tax measures, wage and employment cost implications, substantial support for businesses, and investment in growth opportunities.

Additionally, significant investments in infrastructure and education signal the government’s commitment to fostering a conducive business environment and skilled workforce.

In light of these announcements, it’s imperative for you to adapt and innovate.

The evolving fiscal policies require a strategic review of your business operations, investment plans, and workforce development strategies. Embrace these changes as opportunities to refine your business model, reduce costs, improve efficiency, and explore new markets or sectors for expansion.

The outlook for the future, while challenging, is also ripe with potential.

The government’s focus on infrastructure, digital transformation, and renewable energy, coupled with support for small and medium-sized enterprises, sets a foundation for robust economic growth.

By aligning with these priorities, your business can leverage the available support and incentives to carve out a competitive edge in the marketplace.