Personal Income Tax (PIT) collections, the largest single contributor to fiscal revenues, have grown more than expected so far in 2022/23, but the outlook for large budget deficits and a rise in public debt remains over the medium term.
This is PwC’s forecast in its latest report, South Africa Economic Outlook: Expectations for the Medium Term Budget Policy Statement (MTBPS), released on Monday.
PwC highlighted six key areas on which it believes Finance Minister Enoch Godongwana needs to focus to get the economy on track for improved growth and stability, not least, the centralisation of Eskom’s debt to shield consumers from further massive price hikes.
“The MTBPS needs to address key factors surrounding fiscal and economic sustainability. These are associated with the transfer of Eskom debt to the sovereign balance sheet, actions to avoid Financial Action Task Force grey-listing, the backlog in processing critical skills visas, a planned framework for a comprehensive social security system, management of the government wage bill, currently under threat from a potential public sector strike, and progress with the Infrastructure Fund pipeline,” PwC said.
On a positive note the company added that PIT collections had benefited from a start to the labour market recovery. Budget 2022 planned for a 6.2% increase in PIT collections this year to R588bn. In the first six months of the period, PIT collections were 8.4% higher year on year (y-o-y) due to increased employment and higher remuneration.
Statistics South Africa (Stats SA) reported that the country had
620 000 more jobs in 2022Q2 compared to the same quarter last year, an increase of 4.2% y-o-y. The agency also recorded a
4.5% y-o-y increase in gross earnings across the formal non-agricultural economy during the second quarter.
“The PIT data confirms a suggestion in the previous edition of this report of a start to the labour market recovery, which generally lags an upturn in the overall economic environment. Admittedly, the real buying power of this increased remuneration is nothing to get excited about,” PwC said,
This is because the 4.5% y-o-y rise in gross earnings was accompanied by an average consumer price inflation rate of
6.6% y-o-y, indicating a 2.1% decline in the buying power of gross earnings.
