Reaction by Business Eswatini

To the 2022-23 Budget,

presented by Minister of Finance on the 18^th February 2022

Business Eswatini hereby acknowledges what seems like a pro-poor national budget tabled by the Minister of Finance.

Given our long history of social and economic inequalities, it is therefore encouraging to get the sense that the Minister’s budget speech seems to be aimed at making every attempt to address prevailing socio-economic issues of unemployment and income inequalities inherent in our society. Some have even said that the minister has put soul into what is generally a capitalistic society. Equally, given what this country has been through especially in the past two years, a little ‘soul’ may be what the doctor ordered. We therefore applaud the minister’s efforts in this regard.

In his wide and varied budget speed, the Minister of Finance highlighted a number of positive initiatives aimed at reviving the economy, in particular uplifting the poor in the country, who have been left worse off and worse for wear especially by recent unfortunate events, notably in the past half year. The minister’s policy direction is clearly articulated and aimed at reducing unemployment coupled with an attempt at bridging the income inequality gap. While this will demand a huge investment into training and development of our labour force, the outcome and success of the policy itself may not be guaranteed as there are many pitfalls to be managed along the way.

However, it is BE’s opinion that these are first ‘baby steps’ in the right direction by the finance minister. Our social milieu and economic distribution are, and have been, highly skewed to the exclusion of others and as such, credible efforts were urgently needed to rebalance the scales so that every Liswati has a stake in the economy.

Taxation

As a business community, we welcome the reduction of corporate tax from 27.5% to 25%, negligible as it may seem. Every little bit helps. It is indeed welcomed news for all businesses and comes at a time when it is needed the most. Companies have suffered the most as a result of the COVID-19 pandemic, and the reduction in corporate tax may provide room for companies to breathe and at the same time encourage direct investment and business expansion. We would like to commend Government’s efforts in implementing such policy instruments that respond to the times and environment which we find ourselves in. This is something our government has not been well-known for in the past – and this is meant as a genuine compliment rather than a snide remark. It is also commendable that for the first time in a long time, the Government of Eswatini delivered a speech that is independent of South Africa and one which is responsive to our very own socio-economic situation as a country.

Not to detract from the foregoing, it must be noted, however, that many companies in the country are swimming in red ink especially in the past two years, which means they are in deep debt and are in a loss-making position. As such, they would not have been paying corporate tax anyway, and by extension, this means this tax break may well be a moot benefit to them. Nonetheless, we still positively welcome this development.

Rich to subsidize the poor

Although any increment in tax is unpleasant, the 3% increment from 33% to 36% of PAYE for higher income earners who earn above E300,000 aimed at bridging the income inequality gap is a rational but painful policy that we hope will actually benefit the poor in our society. Lifting the tax bracket where individuals start paying tax from E4,000 instead of E3,500 will go a long way towards enhancing disposable incomes desperately needed by the poor. We would propose government to have the increases staggered, beginning with 34% in the first year and ending with 36% on the third year. A huge 3% jump all at once will be rebuffed by tax-weary taxpayers. 

Expenditure

BE would like to caution government yet again to cut her coat according to her cloth this time around.

That being said, we recognize government’s efforts in allocating taxpayers’ hard earned money toward viable projects. Implementation of recommendations such as the reduction of the number of public enterprises and the continued management of the wage bill, while on the other hand allocating funds to ICT, infrastructural development, health and education is a good policy direction. These projects will enable an efficient business environment and increase competitiveness of our industries even in regional and international markets. The minister must spend thriftily and wisely here even on necessary projects. We also caution against unsubstantiated price hikes for big projects which end up inflating our budget deficit because of cost-overruns. BE hope this will not happen again as the tax payer ends up footing unjustifiable bills from unscrupulous service providers.   

Social Security

we agree that social security as a whole should be a priority for any country including the UBF among others. Our main issue is the way we are dealing with these as a country and how it will be governed. We wish for a holistic discussion on social security as was envisaged in the Draft National Social Security Policy as well as proper consultation of stakeholders.

A detailed analysis of this minister of finance will be issued next week. For now, our first impressions are that the honourable minister may be on the right track.

Business Eswatini