MONEY
19/02/2018 15:47 SAST | Updated 19/02/2018 15:47 SAST

WATCH: Why We Should All Care About The Budget Speech On Wednesday

It's not just "a thing for politicians" – it impacts on all our finances.

Sybe Bakker

On Wednesday, finance minister Malusi Gigaba is expected to present what some have called a "tough and unpopular" national Budget speech for the 2018/19 financial year. The Budget lays out government taxation and spending plans for the next year, and its plans to cover any budget deficits.

"Currently, our policy gives rise to what is called a deficit. This means at present, the government is spending more than the revenue (taxes) collected," explains Zothile Manqele, CA(SA) and founder of ZLM Accounting Solutions.

The revenue shortfall reportedly stands at R51-billion.

Economics expert Darma Mahadea previously told HuffPost that how government is planning to rein in this huge debt remains one of the biggest issues facing our economy — and will be one many are paying attention to on Wednesday.

What's discussed has a direct influence on our personal finances.

Does the budget speech directly affect my pocket?

Yes. "What's discussed has a direct influence on one's personal finances," says economics Lecturer at the University of KwaZulu-Natal Ntokozo Nzimande.

For this Budget, there's a high likelihood that government will raise taxes – including personal income tax – to raise revenue in efforts to stabilise gross debt, he believes.

Manqele agrees: "The medium-term budget speech (MTBS) didn't seem to focus on increasing taxes for citizens, which meant we could breathe until this upcoming speech. Their focus was more in reducing spending, which is not going well right now – but it is very possible that most taxes will be increased to improve government revenue."

Other experts have predicted the same, adding that value added tax (VAT) might also increase.

"It will be a bitter pill to swallow. If this happens, it may ultimately result in you having less in your pocket, as both tax and VAT bite into your disposable income. This in turn impacts the budget you allocate for groceries, transport and other household expenses," says Nzimande.

"And this is why all South Africans should care about the speech," says John Manyike, the head of financial education at Old Mutual.

Speaking to HuffPost, he explained why:

"If you are a parent of a student in an institution of higher learning, you may also be interested to hear how free higher education for the poor is going to be funded – another hot issue in the country since Zuma's announcement last December," points out Nzimande.

"Tax increases could be higher because of this, as it wasn't factored into Gigaba's mini-budget speech," he adds.

As Manyike said, if we don't make adjustments, we'll face financial calamities – so as the environment changes, so should we. It remains important, therefore, that South African consumers be careful with their spending, save more and keep their bank accounts healthy, Manqele concurs – because tougher financial times may be ahead.