South African’s can say thank you to the Minister of Finance for providing some tax relief during his maiden Budget speech that will put money back into their pockets – something that bodes well for economic activity and the bill payments sector.
In the 2022 Budget Speech, delivered by Finance Minister Enoch Godongwana on Wednesday, South Africa’s economic growth estimates sat at 4.8% and the real GDP growth of 2.1% is projected for 2022. These estimates reflect how the country has weathered global developments and South Africa’s own unique challenges, said Minister Godongwana.
Yet Treasury remains focused on measures to offer South Africans some economic relief, and the budget includes R5.2 billion in tax relief to help support the economic recovery, provide some respite from fuel tax increases, and boost incentives for youth employment.
“Indicators like economic performance, liquid organisations and levels of disposable income all have an impact on bill payments. Measures to increase these three indicators bode well for the bill payments sector,” says Andrew Hardie, Chief Executive Officer at Pay@, one of Southern Africa’s leading payment service providers.
Keeping South Africans working
Employment is a key focus in this Budget, and the government is creating and retaining work opportunities, as well as offering corporates tax relief. Over the medium term, R76 billion is allocated for job creation programmes. In addition, the corporate income tax system is being restructured to allow for businesses to grow, increase investment and employ more people.
“Not only will this help with business liquidity, creating and retaining jobs means more people will be earning wages with which to pay their bills and stimulate the economy,” explains Hardie.
Tax relief to ease financial burdens
Many South African households and businesses are still under financial pressure, which has prompted the government to adjust the personal income tax brackets and rebates by 4.5%, in line with inflation. In addition, R44 billion has been allocated for a 12-month extension of the R350 social relief of distress grant. “With the previous social grants scheme we definitely saw an increase in bill payments activity” says Hardie.
A further relief is the announcement that no increases will be made to the general fuel levy on petrol and diesel for 2022/23, providing tax relief of R3.5 billion to South Africans.
“These measures will go a long way towards increasing the disposable income South Africans have available at all income levels and will encourage bill and other payments.” says Hardie.
A helping hand for small businesses
Hardie has welcomed a new business bounce-back scheme announced by Minister Godongwana. Two mechanisms – small business loan guarantees of R15 billion and a business equity-linked loan guarantee support mechanism – will offer small businesses in distress a lifeline.
“This scheme will give small businesses access to loans and support that will allow them some relief from the impact of the Covid-19 pandemic. However, we believe this sector still needs more support to keep growing – especially considering the employment growth potential of this sector,” adds Hardie. “With the growth in this sector we’ll continue to see innovation of payment solutions and exponential growth in payment transactions in this sector”.
Making municipalities and parastatals more effective
Minister Godongwana has also announced more support for basic municipal services, especially for the lower LSMs, to the tune of R28.9 billion. This comes as 175 out of 257 municipalities are in financial distress.
In his speech, Minister Godongwana stressed the importance of consumers paying their municipal bills and urged municipalities to improve their service delivery mechanisms and ensure that billing systems are fair and efficient.
“Billing systems have been a challenge for many municipalities and parastatals and Pay@ has been collaborating with several local governments to facilitate the transition towards efficient billing systems. Efficient billing is crucial for service delivery, especially of key services such as electricity and water,” explains Hardie.
The Budget is clearly focusing on providing economic relief to the taxpayer as South Africans begin to recover from the effects of the pandemic.
“These measures come at a critical time for many South Africans and will encourage bill payments over the next financial year. Not only will these payments add to business liquidity, but will also stimulate the economy and assist in the country’s economic recovery,” concludes Hardie.
Established in 2007, Pay@ is one of Southern Africa’s leading payment service providers and is trusted by prominent South African organisations to optimise their billing and payment processes. Pay@ offers consumers the widest range of relevant, secure, innovative and convenient bill presentment and payment platforms. Its robust system ensures highly efficient processing, with unallocated payments for example being eliminated and transaction success rates of more than 99.996%. Website: https://payat.co.za