NO NEW TAXES IN NATIONAL BUDGET - FINANCE MINISTER

MANZINI – “We could not bring more taxes to the people while they are already facing a high cost of living,” said the minister of Finance.

Neal Rijkenberg said the national budget was void of any new taxes because government could not bring itself to seek more from the public, while the household expenditure had escalated due to high inflation. Other things that have resulted in the high cost of living are interest rates, which have been adjusted upwards at least in three monetary policy statements, as well as the hike in fuel.

The current headline inflation rate is said to be 5.6 per cent, following that it decreased in November from 5.8 per cent, while the interest rates are at 6.75 per cent. This led to banks increasing their lending rate on loans extended to individuals and businesses to 10.25 per cent. In essence, this means that due to the effects of inflation, consumers are spending more on the same items they have been getting at a lower price.

Pressure

Meanwhile, the minister said: “The household pressure is still there and we are trying to cushion the public by not bringing in any taxes in the budget.” In essence, no money has been taken out of the people’s pockets through hikes in taxes. He said government was looking at other avenues to finance its budget (apart from taxes). Rijkenberg said as the national budget grew by 14 per cent from the E23.2 billion allocated in the past financial year to E26.4 billion in the coming financial year, there would be money going into the pockets of the public, indirectly so. This, he said, entailed the creation of more jobs through infrastructure development. Projects which he announced to be under infrastructure development include the rehabilitation of the national road network, which he said would bring more jobs to the people.

In his national budget speech, Rijkenberg also said government would  reinvigorate the development of the Sidvokodvo Industrial Estate of 310 hectares, which would alleviate the shortage of industrial land for investors and create employment for emaSwati. This initiative, he said, was anticipated to create 600 jobs during the initial phase of the construction and 4 000 jobs in the second year. As such, he said in his budget speech, government had provided E171 million for the construction of factory shells in order to attract foreign direct investment (FDI) through them.  
Currently, the unemployment rate stands at 33.3 per cent, according to the 2021 Labour Survey conducted by the Ministry of Labour and Social Security.

The minister said through the creation of jobs, the working class would be eased from the pressure brought by unemployment, as they tended to provide for the extended family. He also said from his perspective, more money was put in the pockets of the people as the social grants programmes, which included scholarships, absorbed over 15 000 people annually. These programmes, he said, put money in the pockets of the people who did not have it. He said these programmes brought relief to the people as they eased their expenditure from personal coffers. The minister said reflecting on the state of the country’s fiscus when they assumed office in 2018 and to what it was now, it was a relief to him as the current Cabinet had been able to turn things around by bringing confidence to international financial institutions, to assist in funding certain programmes.

In the 2021/2022 budget speech, the minister had stated that government was introducing a capital gains tax for businesses aimed at closing loopholes that businesses were using to pay less tax. The minister had said government intended to lift the tax brackets, leaving more cash in people’s pockets earning less than E250 000 per year. “Individuals will now only start paying tax from E4 000 per month instead of E3 500 per month. Unfortunately, we cannot afford to have this reduction other than lifting the upper limits of those earning more. The proposal is to lift the upper tax bracket from 33 per cent to 36 per cent. This would mean that 80 per cent of the tax payers would be better off with more money in their pockets and 20 per cent of higher income earners paid more than E300 000 per year would be worse off,” he had explained.

However, Parliament threw out this suggestion, resulting in the taxes remaining unchanged. On the other hand, University of Eswatini Economics Lecturer Sanele Sibiya concurred with Rijkenberg that the national budget was putting money into the pockets of people. He said the investment by government on capital projects was commendable as it would create employment. However, he said the minister should have outlined how government was planning to ensure that every company in close proximity to the capital projects would benefit.

Allocation

It is worth noting that Rijkenberg on Friday announced that the total budget allocation to capital programmes amounted to E5.85 billion, which reflected a E500 million increase from last year’s budget allocation. This, he said, resulted in the total expenditure for 2023/24 showing an increase of 14 per cent compared to last year’s budget. In light of this, Sibiya said: “This is a great budget but one would have hoped that the minister would outline programmes that ensure that there was skewed equitable distribution of resources.” The economist said it would have been better if government had initiatives that guaranteed that the procurement system would empower every sector in the country and not result in just a few people benefitting from the capital projects expenditure.

Leading to the national budget, Sibiya had said his anticipation would be that it leaned more towards capital investments instead of items that would become recurring expenditure. Sibiya expressed an anticipation of marginal increase on social grants, which included that of the elderly and also scholarships. He said this was because grants in general would become recurring expenditure, which could not be financed in the near future as the source of income was volatile. A large chunk of the country’s national budget is financed by the Southern African Customs Union (SACU) receipts. The SACU receipts for Eswatini this year increased by 102 per cent.

This was a hike from E5.8 billion in 2022/23 to E11.75 billion.  This, according to the Minister of Finance, was the highest share that the country had ever received from the regional bloc and the factors that contributed were a higher than projected outturn of the 2021/22 Common Revenue Pool (CRP) and the surplus emanating from that would be paid together with the 2023/24 revenue share and also 25 per cent increase in the projected size of the CRP for 2023/24 compared to 2022/23.

Instead, Sibiya had said the most that could be done was to invest in capital projects which would bring employment. The economist had opined that government should invest in initiatives that would strive to bolster the economy and absorb people into the active labour sector. “In the job creation space, we should also adopt policies that would empower small businesses that can subcontract and absorb more people to improve the cash circulation in the country,” he said.

Investment

Furthermore, he said there was a great need to attract foreign direct investment (FDI) as job opportunities were needed. He said the capital projects, which could include improving the road infrastructure, could lure investors into the country as they needed accessibility. This, he said, could also bolster the transport sector as the movement of goods in and out of the kingdom could be easier. The economics scholar explained that redistribution should start by integrating community-based entities into the value chain. He said this could be attained through contractual agreements. “We need to ensure that a percentage of the capital budget goes to uplifting small medium enterprises (SMEs) and integrating them in the value chain, which is true redistribution.” He had also said there was high anticipation that the national budget this year would be increased. He said this was because it was election year, which was a costly exercise.

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