PPS Cognition 3 - Page 8

PREPARING FOR THE NEW YEAR S outh Africans spend more than they earn and with continuing depressed economic growth and a projected tax shortfall of R53bn in 2019, things are likely to get worse before they get better. Finance Minister, Tito Mboweni addressed this in his medium-term budget policy speech in late October which gives us an indication of what is to be expected from the detailed Budget speech in February 2020. He indicates that GDP growth has been downgraded to just 0.5% for the year - lower than the 0.7% growth registered in 2018 – because of poor company profits and weak household spending. The shortfall comes after the finance minister punted real GDP growth of 1.5% for 2019 in his February Budget speech. Now, government expects only a slow recovery in GDP growth levels to 1.2%, 1.6% and 1.7% in the three years through to 2022. This is still well below what is needed to cut a national unemployment rate of nearly 30%. Following the gloom of the economy and political uncertainty, the rand has continued to trend down and the JSE has remained flat. This means the, time is right for you to speak to your financial adviser to ensure that your insurances, personal income, expenditure and tax matters are well balanced for 2020 and beyond. On the brighter side, the South African Reserve Bank has kept the interest rate at 6.5% on a moderate outlook for inflation. As stated by the finance minister, this should assist government in setting up a proposed infrastructure fund of R100 billion over 10 years. This is part of a plan to include the private sector in the design, building and operation of projects worth about R526 billion. But amid huge bailouts for state- owned enterprises, state spending in key areas such as education and health will be reduced in future. The national debt now tops R3 trillion and may grow to R4.5 trillion by 2022/23 – or 71.3% of GDP - far more than the estimated 60% of GDP by 2023/24. The cost of servicing SA’s growing sovereign debt has now reached R204bn annually - the fastest-growing part of the budget. Government plans to freeze or adjust downwards the state’s wage bill, which at 35% of overall revenue, is above the global average. Only time will tell if it is successful. Constantly review your personal income statement – manage your expenses But plunging government revenue collection, means the budget deficit will expand to 5.9% in the current fiscal year, averaging 6.2% over the next three years, compared with the 4.2% forecast in February. Put your personal interest relief to good use – increase those debt payments The result of this is that global rating agencies will likely take a dim view of the worsening financial picture for South Africa which will further impact our economic growth opportunities and as a result provide further consumer pressures. So, what lessons can we take from 2019 to help us plan for 2020? Treat your monthly savings as a monthly debt – ensure your savings are number one on your list of payments CLICK HERE FOR RELATED REFERENCES Rate this Article William Chuma Speak to your financial adviser about what options are available to help you plan for 2020. PREVIOUS PPS | COGNITION | EDITION 3 | MAXIMISING your finance for today PPS Financial Adviser 08 09 NEXT PPS | COGNITION | EDITION 3 | MAXIMISING your finance for today