Unpacking the 2017 Budget Speech for your business

Pravin Gordhan

In the midst of a fluctuating rand and an economy in need of resurgence, Minister Pravin Gordhan provides a glimmer of hope to businesses against the backdrop of an already slow growth economy.

FNB Business experts share their views on the Budget speech.

Attie Anderson, Head of Commercial Property Finance at FNB Business:

There was not much in the Budget Speech related directly to the Commercial Property sector; the indirect consequences will however be felt by the industry. The fact that Personal Income Tax increased, together with higher fuel levies, will put consumers under even more pressure. Retail Properties will be affected by lower trading volumes, especially those retail centres aimed at the high end market and durable goods. We may well see an increase in vacancy rates as the impact of the “tightening the belt” reality starts affecting spending patterns.

Some good news was the increase of the Transfer Duty threshold on Properties from R750 000 to R900 000. This may assist Property Investors in the Rental Stock Market.

Dawie Maree, Head of Information and Marketing at FNB Business, Agriculture:

This was a fairly optimistic budget that will put the credit rating agencies at ease. As with SONA 2017, the focus was on transformation. The budget does however offer a limited scope for transformation; given the fact that allocation for land redistribution declined by 3%, but for restitution it increased by 2.5%. Allocations for farmer support and development increased by 10%, to R 3.79 billion which will go a long way in assisting subsistent farmers.

A concern for agriculture is the introduction of the sugar tax for both intrinsic and added sugar beverages. It is still not clear how this will be implemented and consultation is continuing. Another concern is the additional fuel levy and levy for the Road Accident Fund, totalling 39c/litre. The diesel rebate system is still in place and it increased from R 2.62/litre to R 2.83/litre. This is about the only assistance that farmers get from government, compared to other farmers in the world which is heavily subsidised.

Yudhvir Seetharam, Head of Analytics at FNB Business:

The 2017/2018 budget speech was well received amidst both political and economic uncertainty for South Africa. There were key encouraging points for entrepreneurs in particular. While the Minister states that economic growth is slow and times are generally tough, “we draw strength from the resilience and the diverse capabilities of our people, our business sector, our unions and our social formations.”

The Medium Term Expenditure Framework (MTEF) has allocated R3.9 billion of funding for SMEs. This would help entrepreneurs with high potential business ideas turn those into a reality. Indeed, the Minister mentions that the benchmark of success is whether we as a country (and more so with business owners) “create jobs, eliminate poverty and narrow the inequality gap”.

Commodity prices have recovered from previous lows, boding well for those exporting goods. This, along with drought relief, should see a good recovery in our raw materials and agricultural sectors.

The recovering Rand also helps strengthen business and consumer confidence, which imply a positive economic outlook for the year. However, while growth is expected to be positive, the Minister also mentions that it is below the NDP goals.

There needs to be a streamlining of regulatory functions and investment approval processes, particularly for SMEs. This is seen by the DTI leading the initiative to make it easier to start and run a business. Sectors that are getting focused attention would be in tourism and hospitality. However, the increased sales in these sectors might be offset by a strengthening Rand.



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