Beat the Budget Speech with innovation and business synergy

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The whole country waited with baited breath when Finance Minister Pravin Gordhan stepped forward to deliver the Budget Speech; in the run up to this event there was plenty of speculation in the finance sector as well as high anxiety. The people of South Africa were looking for some reassurance and stability after the repercussions to the economy due to the recent cabinet reshuffle of Finance Ministers by the President.

Finance managers and other individuals in the financial and business landscape, currently formalising their 2016 budgets, had a more negative than not outlook to the speech – what with South Africa sitting one teetering notch away from Junk status. Having witnessed our commodity prices plunging (especially oil) and the fact that these prices are 70% less than they were a year and a half ago – it was no wonder that this budget speech would be one of the most poignant yet in our financial history.

People are very conservative when it comes to their budget planning in recent years, and this is with no doubt due to necessity as our government growth in itself is below 1%. So more than ever financial sectors are concerned about where they should be spending their money and what their business growth prospects are.

The bones of the 2016 South African Budget Speech

Many thought that the VAT and personal tax rate would see an increase but neither did. However, we analysed the data revealing that Gordhan actually is increasing the budget through personal tax, though somewhat indirectly. The tax brackets are being readjusted, which means that more people are being moved into higher brackets of tax. With the introduction of this adjustment approximately 28% of the population will be in the maximum tax bracket, and getting more people into that bracket allows for a substantial amount of money to enter the treasure via personal tax.

On why VAT didn’t increase we can speculate that this is because 2016 is a voting year, however we can probably count on seeing an increase in the new year as we will need to funnel more money into the treasury and that is the easiest and most economical

Thoughts on the Budget Speech as a whole…

All in all it was a well thought through budget and although we tend to be critical of such things, this is where we are as a country economically and this is what is needed. What would be interesting to observe is how the government actions the proposed government spending cuts and whether they are able to follow through with their plans. This will play a pivotal role in how rating agencies reassess our country’s status, whether we can indeed deliver.

From a business perspective employment numbers are looking good in small businesses, however bigger businesses are not doing a lot of recruiting. There are also speculations and talks of retrenchment, especially in the mining industry as the commodity industry continues to suffer.

Despite mentioning multiple times of the importance of the private sector and supporting small businesses the budget allocated very little toward SMEs in terms of investment.

Some sound advice

Analysts predict a turnaround soon but unfortunately they cannot agree when this is going to happen, so to help you weather the current economic climate and thrive here is some advice: Spend less, save more. Be wise about your expenditure, do not be afraid to spend though as that will negatively impact on your business growth potential.

The 2016/2017 financial year will require you to be ready for innovation! Beat the budget by bringing in product innovation in your business and sharpening efficiencies in your processes by looking for synergies between different business units and seeing where resources can be deployed across business areas.

Focus on the opportunities because wherever there is negativity in the financial market there are opportunities for those who are brave and willing to take the risk.