News in South Africa 22nd February:

1. Finance budget speech today:

Finance minister Enoch Godongwana will on the 22 February 2023 (today) deliver his budget speech.

Finance budget speech today
Photo by Tima Miroshnichenko

Child support grant:

Human rights group Black Sash has called for the National Treasury to double the cost of the child support grant from R480 to over R800.

The human rights group believes a higher child support grant would help achieve good nutrition from infancy.

The renewed calls for an increase in social grants came on the eve of Finance Minister Enoch Godongwana’s budget speech.

The organisation believes poor South African communities need to hear some good news in the face of rising costs of living, including high food prices.

Service delivery spend:

The South African Federation of Trade Unions (Saftu) has demanded that budget cuts be reversed and spending in “critical areas of service delivery” be increased. 

On Tuesday, the union released a pre-budget statement ahead of Finance Minister Enoch Godongwana’s budget speech on Wednesday. 

Saftu is also demanding a 10% wage increase for public service workers, such as teachers, nurses, and police; a monthly universal basic income grant of R1 500; and allocating more funds to the Post Office.  

In its statement, Saftu general-secretary Zwelinzima Vavi said the union opposed the budget cut on public services that was tabled in the medium-term budget policy statement (MTBPS).

Vavi said the cuts had reduced the availability of jobs in various departments, leading to a shortage of working equipment and a lack of infrastructure, maintenance, and repairs. 

These cuts had affected the condition of schools and public institutions, the union leader said.

2. Reserve Bank preps for grid failure:

The South African Reserve Bank (SARB), through the Financial Sector Contingency Forum (FSCF), is preparing contingencies for a national grid failure.

While the central bank stressed that it is unlikely that a regional or national grid failure could occur, as part of its mandate to maintain financial stability in the country, it must look into such systemic risks.

The bank has been preparing plans to respond to a national or regional electricity grid failure since 2015, noting that the preparations form part of its responsibility to compile and test crisis management plans.

“As part of these preparations, the FSCF has been in regular contact with Eskom, the petroleum industry and the telecommunications industry. The FSCF also conducts periodic crisis simulation exercises to test the financial sectors’ ability to respond to such shocks,” said the bank.

“Crisis management plans are typically based on a range of likely but low-probability scenarios, and the fact that a crisis management plan exists should not be interpreted as a signal that the SARB is anticipating specific scenario to materialise.”

According to the SARB, the FSCF was established after the 2001 September 11th terror attacks in the United States by the then-governor, Tito Mboweni, as a forum where industry and regulators could discuss financial stability issues on a regular basis.

3. 9.62% increase to minimum wage:

The Department of Employment and Labour has published the new National Minimum Wage for South Africa.

The minimum wage will be hiked by 9.62% for the year, taking the going rate to R25.42 (up R2.23 from R23.19 before).

Farm workers will earn a minimum in line with the rate, as will domestic workers. However, workers employed in expanded public works programmes will be entitled to a lower rate at R13.97 per hour.

The new minimum wage means that domestic workers in South Africa should see a 9.6% pay hike. Calculated at 8 hours a day, the monthly wage for domestic workers (160 hours a month) should increase from around R3,700 to R4,100 – an increase of R400.

According to the department, however, most jobs earning the minimum wage will see their wages increase to R1,144 a week (45 hours) or R4,957 a month (195 hours).

The increase to the minimum wage came in higher than initially expected.

When the department started consultations on the increase, it was planning for a hike of around 8%, slightly ahead of CPI, which has been sitting above 7% for the past few months, only dropping to 6.9% in January.

CPI is expected to average between 5% and 6% in 2023.

4. Clarity needed for generating own power:

Finance Minister Enoch Godongwana delivers his 2023 budget at a time the country is in the throes of Stage 6 load shedding. There are high expectations that he will give clarity on how people will be compensated for having to generate their own energy because Eskom is incapable of keeping the lights on.

The Income Tax Act already allows for a 100% deduction on any asset that is used to generate photovoltaic solar power. Although the section that states as much has been part of the law for around a decade, it has not been used much.

There is still uncertainty about what can be claimed and what cannot.

Different solar systems

Different solar systems have different outcomes. That is why blanket statements like “batteries can never be included, and inverters must always be included in the calculation” are difficult to make, says Carmen Westermeyer, partner at Maitland & Associates and presenter of The Tax Faculty’s Tax Café webinar.

During this week’s webinar she referred to a private binding ruling that was issued in 2018 with respect to what deductions will be allowed.

In terms of the ruling, a private company installing photovoltaic solar energy plants is entitled to claim deductions under Section 12B of the act for the photovoltaic solar panels, inverter, DC combiner box, racking, and cables and wiring at each of its photovoltaic solar energy plants.

Westermeyer says given the fact that many people continue to work from home, it makes sense to consider claiming a deduction on the cost of installing solar energy as part of the home office expenses.

But this is not necessarily going to be easy.

Section 12B allows for a 100% write-off in the first year of expenditure, provided the asset is used for trading purposes, was brought into use for the first time, and generates power.

Westermeyer warns that it can be “messier” to attempt to claim a deduction for such a system under home office expenses.

The chance that the system is exclusively used for the home office is “slim to none”. However, it could be possible to make an apportionment in line with the size of the office space.

5. Businesses cut off for Eskom debt:

City Power has disconnected the power supply to business centres, manufacturing companies and the Apartheid Museum for failing to pay millions in electricity bills.

The team from the Reuven Service Delivery Centres (SDC) embarked on their first day of a weeklong cut-off operation on Tuesday and targeted defaulting businesses in Comptonville, Village Main Extension, Ormonde Extension 33 and Aeron.

The Reuven SDC tried to recover R40m of debt owed as part of the outstanding R8.9bn owed across Johannesburg. Reuven SDC is owed R1.2bn, said City Power spokesperson Isaac Mangena.

The businesses cut off on Tuesday were given pre-disconnection notices months ago but have failed to make payment arrangements, he said.

“The list of defaulters includes two business centres together owing a total of R4.3m, two mine equipment manufacturing companies owing a total of R1.3m and the Apartheid Museum near Gold Reef City owing R1.8m,” Mangena said.

All information sourced from articles posted by: EWN, News24, BusinessTech, Moneyweb, and TimesLive.

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