(Battery-powered) spotlight on Eskom
What people really wanted to know was exactly how much of Eskom’s debt the state would take on, and we now have clarity that government plans to take on R254 billion, with the need to borrow R110 billion to finance that.
The introduction of tax relief for independent energy production for households and businesses was a source of comfort amidst the crippling energy crisis South Africa is facing.
In a big win for business, those that spend money on becoming energy-independent can claim up to 125% of those expenses against their taxable income. Households will qualify for a tax deduction for up to 20% of the value of solar panels installed, capped at R15,000.
Pottier welcomed the incentive for business, in particular: “Over the last 24 months there was this bubbling inequality between big businesses that could afford to install solar and generators and so on, and carry on almost with business as usual, while small and medium-sized businesses, that don’t have the cashflow and the capital to invest in energy independence, were left behind.”
He added: “This tax relief for business is a super critical step that goes some way to ensuring we don’t add energy inequality to our existing wealth and income inequality.”
Something for retirement savers
Another positive noted by Pottier was that adjustments for inflation were passed through to social grants as well as increases in provisions for the retirement tax table, which hadn’t been reviewed for a long time.
From 1 March 2023, the tax-free amount available from retirement funds, whether an early withdrawal or upon retirement, will be increased by 10%:
- Upon retirement, the tax-free lump sum withdrawal will now be R550,000 (up from R500,000).
- The tax-free portion available on early withdrawals, whether as a result of resignation, retrenchment or termination of employment for another reason, will be R27,500 (up from R25,000).
This 10% upward adjustment has been applied across the tax table bands for withdrawal benefits and retirement fund lump sum benefits.
Other pots still on the boil
“Government expects to provide further relief to retirement savers with the proposed two-pot retirement system,” says Pottier. “One of the key components of this new system is that members would be able to access a portion of their savings before retirement.”
The two-pot system is expected to come into effect on 1 March 2024. Clarity on key details, such as the amount savers could immediately access when the system is implemented, are still to be provided, and Pottier warns that further delays could hamper the industry’s ability to implement the reforms by the proposed date.
Further clarifications are still expected soon on the tax treatment of employer contributions to retirement funds as well as the tax-deductible limits for retirement fund contributions made by members who are no longer tax residents of South Africa. 10X will continue to keep an eye on this and share details as and when they become available.
Beyond tax relief, other positives Pottier noted in the Budget were the “prioritisation of issues we have been calling for for years”, such as a suitably funded programme to fix our crumbling infrastructure, a review of skilled visa applications, and the issuing of water licenses.
He pointed to some of the lowlights in the Budget, including that debt-to-GDP is expected to stabilise three years later than initially anticipated. “We’ve seen this time again with the Budget, where the expectations around debt fluctuate from one Budget speech to the next.”
Still, he added that the Finance Minister was “trying really hard to make it clear that government is focusing on running a primary surplus, and reprioritising spending to ensure that the state is isn’t just spending on consumption, but rather trying to put capital into productive uses”.
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