Finance Minister Enoch Godongwana delivered the 2023 Budget on Wednesday, with a number of big announcements, including taking on a significant portion of Eskom’s debt and a tax incentive for businesses and individuals to invest in renewable energy and solar panels.

Here is what you need to know:

Eskom Debt Relief

• A total debt-relief arrangement for Eskom of R254 billion.
• This consists of two components. One is R184 billion. This represents Eskom’s full debt settlement requirement in three tranches over the medium term. Second is a direct take-over of up to R70 billion of Eskom’s loan portfolio in 2025/26.
• The arrangement is accompanied by strict conditions to safeguard public funds. These conditions include:

1. Requiring Eskom to prioritise capital expenditure in transmission and distribution during the debt-relief period.
2. For the company to focus on maintenance of the existing generation fleet to improve availability of electricity.
3. That the debt relief be used to settle debt and interest payments only.
4. And that Eskom implement the recommendations emanating from an independent assessment of its operations, which has been commissioned by the National Treasury.

Tax measures to encourage businesses and individuals to invest in renewable energy and increase electricity generation

• From 1 March 2023, businesses will be able to reduce their taxable income by 125% of the cost of an investment in renewable projects.
• There will be no thresholds on the size of the projects that qualify, and the incentive will be available for two years to stimulate investment in the short term.
• Individuals who install rooftop solar panels from 1 March 2023 will be able to claim a rebate of 25 per cent of the cost of the panels, up to a maximum of R15 000.
• This can be used to reduce their tax liability in the 2023/24 tax year. This incentive will be available for one year.
• Changes to the Bounce Back Loan Guarantee Scheme are also proposed to incentivize renewable energy, rooftop solar, and address energy-related constraints experienced by small and medium enterprises.
• Government will guarantee solar-related loans for small and medium enterprises on a 20 per cent first-loss basis.

Infrastructure investment

• Overall, the public sector is projected to spend R903 billion on infrastructure over the medium-term.
• The largest portion of this, around R448 billion, will be spent by stateowned companies, public entities and through public-private partnerships.
• These spending plans are mostly for strategic projects in the following sectors:

1. Transport and logistics will spend an estimated R351.1 billion, including for SANRAL to improve the road infrastructure network.
2. Water and sanitation is planned to spend R132.5 billion over the next three years, mainly by the water boards.

REVENUE AND TAX PROPOSALS

• Tax revenue collections for 2022/23 are expected to total R1.69 trillion. This exceeds the 2022 Budget estimate by R93.7 billion, and the 2022 MTBPS estimate by R10.3 billion.
• Over the medium-term, revenue projections are R6 billion higher than the estimates of the 2022 MTBPS.
• As a result, there are no major tax proposals in this budget.
• Government will provide tax relief of R13 billion:

1. In addition to the tax measures to promote investments in renewable energy, the general fuel levy and the Road Accident Fund levy will not be increased this year.
2. To ease the impact of the electricity crisis on food prices, the refund on the Road Accident Fund levy for diesel used in the manufacturing process, such as for generators, will be extended to manufacturers of foodstuffs. This takes effect from 1 April 2023 for two years.
3. The personal income tax brackets will be fully adjusted for inflation, which will increase the tax-free threshold from R91 250 to R95 750.
4. Medical tax credits will also be increased by inflation, to R364 per month for the first two members, and to R246 per month for additional members.
5. The retirement tax tables for lump sums withdrawn before retirement, and for lump sums withdrawn at retirement, will be adjusted upwards by 10 per cent. This means that the tax-free amount that can be withdrawn at retirement increases to R550 000.
6. The brackets of the transfer duty table will also be increased by 10 per cent, allowing properties below R1.1 million to avoid any transfer duty payments.
7. The research and development tax incentive will be extended for 10 years, and will be refined to make it simpler and more effective.
8. The urban development zone tax incentive will also be extended, by two years, to allow for the review of the incentive to be completed.

Retirement system changes

• After further consultations, government intends to publish revised draft legislation on the ‘two-pot’ retirement system. This will include details on the amount that could be immediately available when the system is implemented from 1 March 2024.
• Any withdrawals from the accessible “savings pot” would be taxed as income in the year of withdrawal.

“SIN” TAXES

Government proposes an increase in the excise duties on alcohol and tobacco of 4.9%, in line with expected inflation. This means that the duty on:

• A 340 millilitre can of beer increases by 10 cents,
• A 750 millilitre bottle of wine goes up by 18 cents,
• A 750 millilitre bottle of spirits will increase by R3.90,
• A 23 gram cigar by R5.47,
• And on a pack of 20 cigarettes, the duty rises 98 cents.

EXPENDITURE PROPOSALS

• Over the medium-term, more than 60 per cent of non-interest expenditure goes to the social wage, while spending on buildings and other fixed structures – such as roads and dams – will increase from R62 billion in current year to R104.2 billion in 2025/26.
• The 2023 Budget allocates additional funding totalling R227 billion over the medium term.
• There are several priorities that will be funded through this additional money:

1. R66 billion is allocated to Social Development over the medium term, with R36 billion to fund the extension of the COVID-19 social relief of distress grant until 31 March 2024.

R30 billion will be used for inflation-linked increases for other social grants:

•  The old age and disability grants increase by R90 on 1 April 2023 and a further R10 on 1 October 2023. The result is a total increase to R2090.
• The child support grant rises from R480 to R510 on 1 October 2023, while the foster care grant increases from R1070 to R1130 over the same period.

• R23 billion and R22 billion will be allocated to health and basic education respectively, to cover the shortfall in compensation budgets and to improve services.
• R8 billion is allocated for basic services through the local government equitable share.
• R14 billion is allocated over the medium term to fight crime and corruption:

1. The South African Police Service is allocated R7.8 billion to appoint 5,000 police trainees per year.
2. The National Prosecuting Authority receives R1.3 billion to support the implementation of the recommendations of the State Capture Commission and the Financial Action Task Force.
3. The Financial Intelligence Centre is allocated an additional R 265.3 million to tackle organised and financial crime.
4. The Special Investigating Unit is allocated R100 million to initiate civil litigation in the special tribunal, flowing from proclamations linked to the recommendations of the State Capture Commission.
5. The Department of Defence is allocated an additional R3.1 billion to enhance security on South Africa’s borders.

The public wage bill, SAA and the Post Office…

• Godongwana also tabled the second adjustments appropriation bill for the 2022/23 fiscal year.
• The Bill proposes an allocation of R45.6 billion to provide for the carry-through costs of the 2022/23 public-service wage increase.
• R1 billion is allocated to South African Airways to assist the carrier with the business rescue process.
• The South African Post Office is allocated R2.4 billion.
• The allocations for these state-owned companies will be accompanied by strict conditions to ensure sustainability, accountability and transparency. ”If the conditions are not met, the money will not flow.”

DISASTER RESPONSE

• In relation to the recent floods and the national disaster declared in various provinces, R695 million is available in this financial year for immediate relief. A further R1 billion will be available next year.
• The emergency response also requires provinces and municipalities to reprioritise existing allocations to cater for the immediate needs of affected communities, such as
  temporary shelter and social assistance.
• The contingency reserve will also be used to fund emergency responses, including as undertaken by the Defence Force.