South African Banks Deliver Mixed Verdict On Budget

An analyst says that there has been a "mixed response" to the South African budget among the country's banks and financial institutions, which was put forward last week after a month-long delay owing to splits in the government of national unity GNU.

The African National Congress ANC and its finance minister Enoch Godongwana were at loggerheads with its coalition partner, the Democratic Alliance DA, in the weeks running up to the budget over controversial plans to raise VAT from 15 to 17. There were also fears from some in the DA, which sees itself as a pro-business party, that the ANC could seek to hike other taxes and potentially dent investment and economic growth.

By way of compromise, Godongwana suggested in the budget raising VAT to 16 in two stages. Other measures include freezing personal income tax thresholds, meaning that earners will pay higher taxes in real terms as salaries have increased in line with inflation.

The budget was watched closely by South Africa's banks, which posted strong revenue growth last year because of the country's improving macroeconomic climate and stabilising political environment.

Menzi Ndhlovu, political and economic analyst at Signal Risk in Cape Town, says "the response to the budget among South Africa's banks has been pretty mixed" and there are both potential risks and opportunities for financial institutions.