Prudence is power for South African businesses owners

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Rolling down a hill without brakes is an image in many minds when thinking of the current financial state of South Africa. So how do we navigate our businesses through what seems like an inevitable crash?

Prudence is power for South African business owners and action on tough decisions await as things unravel. Let’s take a look at a few key factors that is a must know for business owners to best steer their ship through the rough waters that lie ahead.

The Budget Speech

Tito Mboweni is set to deliver the budget speech on 26 February 2020 and by no means is anyone expecting any good news. Failing state owned entities like SAA and Eskom remain in the spotlight, with Eskom being a very strong driving factor behind the output performance capabilities of our work force.

The real question here will be if the three part division in Eskom has seen any reasonable attention. The medium term budget policy statement made promises that this will be done by March in 2020 which is only two weeks away. Some of the biggest listeners will be from the manufacturing and mining sectors.

Tips for Tito!

The finance minister is open to tips and opinions from the public. This gives big – and grouped smaller players a direct voice with the boss man. You can submit your own suggestions using the SARS website:


Taking a look at what we could expect from the budget speech

The area with the most focus will inevitably be tax revenue. The overspending and shortfall on budget has gradually spiraled out of control, signalling a potentially higher deficit than originally anticipated.

Fiscal drag has not seen much improvement following increases on taxes including PIT and VAT during previous periods. This is creating the undesired effect of making the poor poorer and emphasizes the need for relief.

An increase in CIT seems more risky with lower tax revenues due to a lower output  by the power utility. For this reason a VAT increase would be deemed a safer option, most importantly due to a lesser negative effect than that of a corporate income tax hike.

Read a full report on the 2020 budget predictions courtesy of Pricewaterhouse Coopers:


What about the credit rating?

Moody’s has been more than understanding than the other rating agencies, leaving South Africa with a negative outlook during the last review. This places our economy on the door step of junk status and very little to provide confidence.

Moody’s revised the growth forecast down to 0.7% from 1% due to economic up-hill battles citing Eskom blackouts and lacklustre demand.

Global view

For a final point we can track the current rand vs dollar price where it seems that the news to come may be in progress of being priced in.The last time that we saw the rand vs the dollar at 13.90 was around the beginning of January 2020 with a steep bullish rally since then.

Final thoughts

Business owners have the toughest job, keeping staff and adapting to the current market conditions. It’s not a pretty picture so the writing is on the wall. We need to strap in, cut spending and brace for a rocky ride if we let the last investment grade slip through our fingers.

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