Cheapskates and proud of it!

Every year there are dozens of newspaper, magazine and blog articles dispensing free advice on how to save money in tough times. These are not necessarily the best pieces of advice, but are always highly entertaining - if only to see how far some people will go to save a buck or two. Justmoney put a few of these together for you - use them, don't use them... either way they'll provide food for thought.

Water & Electricity

With municipal rates climbing at an alarming rate, trying to find ways to save money on them makes complete sense. Sensible suggestions on this topic are usually to do with saving your water usage - taking a shower instead of a bath, turning off the tap while brushing your teeth or maybe even watering the garden at night to avoid excessive evaporation. Pushing it is when you take the suggestion to "flush every now and then" or to "wash your body and your clothes in the shower at the same time".

When it comes to saving electricity, fitting more efficient light bulbs can save you on the power usage. Heaters are big users of electricity or gas, so instead of firing up the heater at the slightest hint of cold, consider wrapping in a few extra layers instead and see if that works for fighting off the cold. The most cheapskate advice we've read about saving money on electricity? "Visit friends and family as often as possible during winter. Then you don't have to cook for yourself and can keep the lights off the entire time you are out of the house..." Yes, it might save you some money, but good luck in saving your friendships when you pop round for dinner three days a week...

Cleaning Products

We all know that cleaning products are expensive items, so saving a few bucks on them might just put you right. Depending on how dirty your house is, this homemade cleaning concoction might just do wonders for your budget as well as your dirty countertops.

Combine white wine vinegar, bicarbonate of soda and lemon juice. Then just repeat "Martha Stewart" in your head as your wonder around the house cleaning everything in site...

Shampoo and shaving cream are both expensive bathroom items. Get that little bit more out of them by immersing them in hot water when they seem to be empty - you'd be surprised at how much more you can get out when you really try.

"Wash, rinse, repeat?" You must be joking- these are tough times people - one round of hair cleaning is good enough -you'll double the lifespan of your shampoo and conditioner!

Pushing it a little...

Charging your cell phone at work is probably something you can get away with, charging the rest of your household appliances may be pushing it a bit too far. Yes items? A cell phone, possibly your digital camera battery. No items? Electric toothbrushes, razors, children's toys and anything else that might require an additional bag to sneak them into work.

Our favourite money shaving tip!

Trawl the Internet long enough and you'll find so many money saving tips that the line between bright and bizarre will begin to blur. But one sneaky little money saving tip you just have to love has to do with toilet paper of all things - hardly a massive expense to most of us, but something that seems to run out faster than you can imagine.

The theory? Squash your toilet rolls before you place them on the roller at the wall. This way, your kids won't be able to roll out meters of the stuff at a time and you'll suddenly find yourself making the loo roll last a little longer. Granted -it's not the world most enormous saving, but you have to love the ingenuity of the idea.

Got any really original money shaving tips for us? Send them to us at editor@justmoney.co.za and you could see them in one of our next newsletters.

More people in court due to debt

Statistics South Africa released the civil cases for debt April 2009, today the 18th of June 2009. This report looks at how many people have summonses issued against them for non payment of debt and also the number of civil judgements which means how many folk were actually found liable and then the report looks at the value of those judgements. Summonses are up by 15.6% over the last three months but have decreased by 5.5% since April 2008. Whilst judgements have increased 6.6% over the last three months and also declined by 1.6% year on year. However the value of judgements has jumped up 13.1% over the last three months and 17.4% over the whole year. The credit crunch is crunching.

• Don't hide your head in the sand
• Plan a budget
• Get debt counselling

These figures tell us that more and more people are feeling the strain, and that more and more people are being taken to court because of their debt burden. Debt is a scary thing and often the first response is to pretend that it isn't happening. However even though more people are having summonses issued against them it seems that there are more people dealing with their debt this year as evidenced by the drop in actual summonses in the three months to April. The value of civil judgements has risen to R 566 900 000! A large amount of money outstanding. The value of summonses has also grown meaning that as the crisis bites companies are calling in their debts to ease cash flow issues.

When you are faced with a debt problem the most important thing to do face up to it. Don't ignore it, debts have a nasty habit of spiralling out of control especially if they are prey to compounding interest. The National Credit Act created debt counsellors who are trained professionals empowered by law to help you get out of debt. They can freeze your debts from being collected and re-negotiate a repayment plan with the people you owe money to, while you get it sorted out. If you were lent to recklessly you may not even be fully liable for your debts, and even if you are but are feeling the pressure, get professional debt help before you need professional legal help!

Don't get ripped off

A scandal is brewing in the financial sector. Accusations have been made that a South African now resident in Australia has been running a Ponzi style rip off. Basically massive returns were promised for investing in the scheme but the money that new investors paid in was actually used to pay out prior investors. No real value was being created and it was allegedly a case of robbing Peter to pay Paul. In times like these it is easy to feel that with all the financial pressure on you just have to do something, and if someone comes along offering the end to all you problems you might just fall for it. So how do you not get ripped off?

• If it sounds too good to be true it probably is
• 'Secret' methods are nonsense
• Due diligence is key

Barry Tannenbaum is accused of running a Ponzi style scheme whereby he would pay older investors with new investors' money. This kinda crime is named after Charles Ponzi who wasn't the first to use this sort of scheme but is the one who lent his name to it. The promised returns can cause even experienced business folk to invest money in dodgy schemes. This is the power of greed and anyone can fall prey to it. It should be noted that Tannenbaum has denied all charges and is sitting happily in Australia awaiting the legal outcome. In a climate of fear a little bit of its corollary greed can get its hooks in and cause you to act irresponsibly with your money and get all Ponzi on it.

Knowing exactly what you have in your budget will enable you to work out what you can afford after all your deductions. Money that is left over can be used to grow your money or for investment. However you should look at how much risk you feel comfortable with and the higher the promised returns in general the higher the risk of the scheme. Money making is a slow process if real value is being created, unreal expectations are often driven by extremely risky investment schemes, just look at the global financial crisis where dodgy mortgage investment schemes caused a lot of the crash. In the end if it sounds too good to be true, it more than likely is too good to be true. So don't waste your money on get rich quick schemes but rather do a budget and ask a financial advisor if you have any specific queries about your investments.

Inflation stays stable at 8.4%

Statistics SA released the Consumer Price Index or the Inflation figures for April 2009 today May 27th 2009. These figures show that inflation has dropped by 0.1% to 8.4%. Average prices increased by 0.5%. This is not totally unexpected and can be seen as the long tail of inflation targeting that has been pursued by the Reserve Bank. Interest rate cuts have an effect on inflation but this effect takes time to manifest and the MPC will be announcing the new interest rates on Thursday 28th of May 2009. GDP is down and this will spur the government to try to kick start the economy. So what has gotten cheaper or not?

• Food and non-alcoholic drinks increased 0.5%
• Bread and cereal decreased by 0.3%
• Petrol increased by 4.9%

The inflation figures when you pick them apart show that the sectors that are getting more expensive most quickly include the petrol price, increasing by 4.9% and hot beverages at 4.7%. These kinds of sectors don't respond as quickly to rate cuts, as there are more inputs to go through before the effect is felt. The Monetary Policy Committee has already cut interest rates by 350 basis points or 3.5% since December 2008 and these cuts are starting to manifest in the economy now, although it seems that with such a small change that the major effects of inflation targeted rate cuts have reached the end of their usefulness.

In order to deal with the economy at the moment using a budget planner is key. Stubborn sectors such as food and transport are still not in parity with the inflation rate and you should budget more for food than before rather than less as you would expect if prices are going up more slowly. These savings are not being passed onto the consumer and we have all got less spending money than previously. So this means we have to be ultra careful with our money if we are to survive the rest of the year before the expected turnaround sets in.

It's official: We are in a recession

Statistics SA released the quarterly Gross Domestic Product figures today. GDP has dropped by 6.4 percent! GDP is 'a basic measure of an economy's economic performance, [it] is the market value of all final goods and services produced within the borders of a nation in a year'. As such it is an indicator of how the economy is doing and is a very important indication of what the government might do to manage the economy next. This drop means we are in a recession. So what do these figures mean?

• Jobs are less secure
• Home loans less available
• Budget planning is imperative!

There has been some speculation that we are heading into a recession and these figures confirm that we have. Recession is defined as two consecutive quarters of contraction rather than growth. In a growth model based economy, contraction, recession and depression are the voodoo words of economic collapse. A growth based rather than sustainable economy will always be worried by lack of growth as many loans are based on the fact that the economy is expected to continue to grow. So in a growth based economy, and the government has signalled that it wants to follow a developmental model, we can expect the government to react to these figures by trying to boost the economy.

One of the methods that the Government has mandated is the Reserve Bank policy of inflation targeting. This is basically an interest rate strategy and we can expect the MPC (Monetary Policy Committee) to cut rates on Thursday 28th May 2009. The announcement will be broadcast live on SABC 3 from 15:00 to 15:30. The fact is we are in a recession and planning your budget has never been more important. Sound personal finance planning now will see you through the lean times ahead until the cycle turns and a new boom market is created. Of course in a growth model economy we will always have a cycle of boom and bust. So with no real change expected there, protect yourself now to survive the economic waves later.

How do I save?

In these turbulent times having a little bit put aside is essential. The thing is how do you go about saving? There are many savings accounts out there but not all of them are going to be what you need. So Justmoney decided to look at savings accounts and work out what you can do. This is what you need to do first in order to get you on the road to saving and protecting your future against lifes ups and downs.

• Plan a budget
• Set aside what you can
• Compare savings accounts

There most important thing you need to do is to draw up a budget. When you have planned a budget then you can work out how much you can save. Even if it is only a small amount, put it aside each time you get paid and save it up for a rainy day. Then find out which is the best savings account for you. There are a few things you should ask yourself. Do you want to use your savings account for transactions? What sort of access do you need? Instant? Fixed period? 32 Day notice? When you have worked out your budget you should save a regular amount each month.

Justmoney ran its calculators and can suggest that if you can keep at least R5000 in your savings account then a Sanlam Liquid account will pay well. If you can keep R100 minimum for 12 months then a Standard Bank Contract Save is a good account. The ABSA Target Save account pays well if you have R100 and can keep it for 6 months with a 32 day notice period. And if you can keep a minimum of R10 000 then the Nedbank Park-it account allows you 24 hours withdrawal notice after you have kept the money in the account for at least 14 days.

The best way to realise your savings dream is to deposit a regular amount and put it in a low or no fee account, then have a long term plan and expect to not touch that money for at least a year if not longer. This way you can take advantage of interest compounding and grow your money.

Should Eskom get 34 percent?

Eskom has applied for its latest price increase from NERSA the National Energy Regulator of South Africa. They want a whopping 34%! This is allegedly going to save us in the future, but why wasn't Eskom saving in the past? The application to NERSA says that the extra money will go to capital expansion projects or investing in the ability to make more electricity. This application is also an 'interim' application meaning Eskom still wants more than this! So what can you do?

• Always plan a budget
• Switch off lights behind you
• Don't use an electric heater

Now these are just suggestions to help you get by if Eskom does raise its prices, and the truth of the matter is that while they might not get the entire 34% they will probably get some sort of price increase allowed by NERSA. In the application it was noted that the public is given a space to comment on the application. This is your chance to say something about the matter. Has Eskom got enough already? Do you feel that the regulator should give them more? Should Eskom be paying bonuses when asking for 34 percent price increases? The public needs to submit any comments that they might wish to make directly to NERSA.

NERSA notes on its website that 'NERSA would like to encourage all stakeholders and the public to actively participate in this process by submitting written comments on the attached Eskom Interim Price Increase Application. Written public comments can be submitted to Mr Pule Mothiba or Ms Priya Singh at this email address: Eskominterimprice2009@nersa.org.za. The closing date for submission of written comments is 02 June 2009'. This is your chance. Get those comments into the regulator and let them know what you the public think.

What's in store for the future?

The South African Reserve Bank has released its Monetary Policy Review on the 14th of May 2009. The last review came out in November 2008. GDP contracted at an annualised rate of 1.8% in the final quarter of 2008. This is a result of a number of factors including the global financial problems and inflation. We are still in for a tough time ahead and the markets are not expected to come right too quickly. So what can you do while the turbulence washes over us?

• Batten down the hatches!
• Plan your budget
• Get a savings account

There is now a real possibility that we will enter into recession for the first time in 17 years and the contracting growth we are seeing is expected to last for most of the rest of the year with a turnaround envisaged towards the beginning of 2010 only. Inflation is slowing, partly as a result of the inflation targeting steps taken by the Monetary Policy Committee in cutting interest rates and partly due to the slowing economy damping spending and inflation at the same time. We are not expected to hit the targeted range of 3-6 percent inflation this year although we should come in close to the top end of the target. There are still problems that may occur including a massive hike in Eskom tariffs to fund infrastructure spending.

The report estimates that inflation will hit 6.2 percent by the end of 2009 although this is an estimate with, as with all economics, a heavy dose of Ceteris Paribus, or if nothing else comes along to upset the apple cart. This is a serious flaw in economic thought as projections and estimates always lag behind the reality and reality is in a constant state of flux and it is not really possible to separate factors and treat them as independent when in fact they are highly interlinked and influence each other. So we can expect some light on the horizon but now is the time to expect change and prepare yourself for any shocks that could still occur, plan a budget and stick to it and start putting money aside for just in case.

Are you still going shopping?

New data released by Statistics SA has shown that the retail trade has dropped off in the first three months of 2009 by 2.9 percent in real terms. The drop off comparing March 2009 to March 2008 is a staggering 5.3 percent lower. This means that less folk have got the cash to go shopping. So if you want to be able to still go out to the shops now and again, what should you do?

• Plan a budget
• Compare your credit cards
• Only get what you need

These figures are a bit of a shocker and plainly show that there is just not as much money floating around as this time last year. The numbers show a drop if held to constant prices from 2008, which means that if you take out the effect of inflation then people are buying less than before. These sort of figures suggest that the economy is contracting raising fears of a recession. In conjunction with these numbers manufacturing output was also down indicating that fewer goods are being made, which shows us that even less is expected to be sold in the next few months.

If you put together retail sales and manufacturing output this makes up a sizable portion of our Gross Domestic Product or GDP, somewhere in the region of a third. So we can surmise that a third portion of our economy is already in decline. So if you really do need to spend make sure that your budget is up to date, shop around and compare your credit cards to make sure you are getting the absolute best interest rate and best value card. We can expect the economy to falter further so don't splash out just yet, in fact put some money away and it will come in really handy when the economic outlook starts to improve again.

The inflation targeting debate

The new Minister of Finance, Pravin Gordhan, has signalled his willingness to debate the policy of inflation targeting that has lead our interest rate policy since 2002. The outcome is still uncertain, although analysts believe it will be more on the lines of tweaking current policy rather than a full scale about face. The policy has served us well so far but as the global and domestic financial outlooks change so should our policy. So what did the minister allude to us doing?

• No over borrowing to boost growth
• Spending on infrastructure
• Prudent debt management

Inflation targeting is seen as an investor friendly policy and the market watchers were keenly looking for a reaction in the international bond market to the announcement that Gordhan is open to debate on inflation targeting, but the reaction was minimal meaning that the international markets are so far happy with the new dispensation here in South Africa. The Government is also busy releasing a new bond designed to raise one billion dollars US to help finance our budget deficit. The government knows its budget gap is too wide, but have you planned exactly what is in your own personal budget?

The left has generally been critical of inflation targeting believing it to be more investor rather than worker friendly. However we can expect that any change implemented will be gradualist and evolutionary rather than revolutionary and that the Minister will be looking for a consensus view with regards to any changes in monetary policy. The Government is expected to pursue a more growth oriented strategy and any new policy direction would play to that.

Filling up on your credit card

The Department of Minerals and Energy has published draft regulations for comment on changing the law to allow petrol purchases with credit cards. If you wanna respond then you gotta write it down and send it in before the 30th of May 2009. Previously it has been illegal to pay for petrol with a regular credit card. This is due to petrol prices being set by government and the cost of using a card is carried by retailers and credit card holders get benefits from their cards. This amounts to a discount for consumers or a burden for retailers which would skew the pricing as established by Government. Now the Government want to open it up for the World Cup 2010. So if they do what should you do?

• Compare your Credit Cards
• Plan your Budget
• Don't go overboard

The draft regulation contains this clause: 'The costs to a retailer arising from the acceptance of payment in the form of debit, credit and hybrid cards must not exceed the costs of cash as a form of payment determined by the Department of Minerals and Energy on an annual basis'. The difficulty here is that the cost of paying via a credit card will have to be picked up by someone. If the petrol stations are not supposed to pay over the cost of cash will the banks meet this and allow free transactions on petrol purchases? This seems highly unlikely.

Further the Petro card setup we have at the moment charges interest on all purchases from time of purchase rather than allowing an interest free period like most regular credit cards have. Would this continue or would the banks extend the interest free period to fuel purchases and could this then be used to offset the transaction cost that the proposed law stipulates is to not be more than the cash cost? The commentary period is almost over so if you want to have your say write it down and send it to the Department. This law could change how you budget for petrol and have long reaching effects so get involved.

Will the elections affect the market?

The South African electorate has been voting in the government for the next five years. There has been a lot of talk about whether the expected next President of the Republic, Jacob Zuma, will be a good or bad choice if the ANC is re-elected, which is widely expected. In South Africa we vote for a party not an individual, which means that the party with the most votes gets to appoint the President. The results are not yet in, but it looks likely that the ANC will win. So what will the effects of the election be on the market?

• Risk is already priced in
• Rand not expected to be affected
• Market could respond positively

The best thing you can do is go on as usual and plan a budget.

These are the opinions of various commentators in the financial papers.

Fin24 looked at the factors in the market that may come in to play due to the election. Historically the market rallies and goes up after the elections before returning to the fundamental underlying levels it should be at. This means we may get a market bonus for a few months before the effects of the credit crunch start weighing the market down again. An economist interviewed in the article said ' we could be pleasantly surprised with the performance of the market after the election'.

Business Report had a look at the Rand and its current weakness and their interviewed experts were of the opinion that the weakness of the Rand at the moment was not related to the elections and they further said 'We can't, in fact, see the result having much influence'. Politicsweb noted that Trevor Manuel is expected to stay on after the election and this should go some way to quieting any jitters that may be felt as the new administration comes in. The article noted that as the votes started to be counted and results were slowly being published the Rand was generally steady.

Is the recession receding?

New data published by the Reserve Bank has pointed to the possibility that the recession we may not even be in is starting to lift. This is according to the leading economic indicator which measures expected conditions at least six months in advance. It is still lower over the course of the next year but has started looking up month on month. This means that things may be getting better. So what can you do to beat the recession?

• Always plan a budget
• Compare your credit card interest
• Don't splash out yet
  

This data was also looked at by The Times. Although they were fairly pessimistic about a technical recession being entered as this is the consensus of the economists that they interviewed. The article explains in more detail how the leading indicator works and how it follows the business cycle giving a fairly accurate approximation of trends within the economy. The marginal increase however is still way down on the figures we experienced for much of last year.

Business Day further calls the data indicative of any recession we may enter as being lesser than has been expected. This is marginally good news, but it looks like we will weather the global recession rather easily here in South Africa. The article also carries some more positive comment by economists who do not think that we will enter a recession at all, but rather post minimal growth figures rather than contract. In the face of the global storm we are still fairly decoupled and the crisis comes at us by proxy.

Three ways to spend less

There was new data released by Stats SA last week that looked at wholesale and retail trade conditions. Wholesale is the volume of goods being sold into the shops, the retailers. If consumers spend less then the shops don't expect to retail as much and don't order as much wholesale.The one follows the other, so now interest rate cuts have been called for to stimulate spending. What can you do if even the shopkeepers are worried?

• Plan your budget and stick to it
• Spend only what you can afford
• Check if you have the best interest rate

While we wait for interest rate cuts to come you can compare your credit card with all the others on Justmoney to see if it is the best value for the way you spend.

The Dispatch looked at some of these figures and quoted an economist saying that a cut in the interest rate would help bring spending up to its more usual levels. Apparently 'A tighter credit environment, job losses and consumer debt have weighed down on spending patterns'.

Fin24 also looked at how the downturn is affecting our everyday lives as we spend less, eat less and splash out less. Searching around for the best deal has become the new way to shop and the article noted that we are being much more price sensitive and buying many more store brands than before. We are also going to the shops more often but we aren't getting the cash out as readily as this time last year.

Even renting gets difficult

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Even renting gets difficult

There has been some new research released by the Tenant Profile Network (TPN), which is a credit bureau, regarding rentals.

TPN do credit checks for landlords on prospective tenants.

They have a good idea of where the rental market is and how many tenants are defaulting and finding it hard to stay on top of their rental payments.

The Times looked at this research and noted stats from TPN.

Twelve percent of tenants were defaulting and unable to pay their rent, while forty six percent of tenants were only making partial payments or paying late.

This report apparently showed a massive decline from the first quarter of last year when seventy percent of tenants were paying their rent on time every time, but by the end of last year, as the financial crisis deepened, only fifty four percent of tenants were consistently paying all their rent all of the time.

This sort of problem can be seen with Carl Niehaus.

He couldn't pay his rent so he was taking loans (even if they were 'unauthorised') to pay things off.

The thing is when you take credit you pay interest on it. If this money is used to pay rent, you are getting yourself into a debt trap.

According to TPN most defaulters were in difficulty due to over extending themselves financially or renting property that costs much more than they can actually afford.

The worst defaulters were in Kwazulu Natal, at eighteen percent defaulting but only eight percent in the Western Cape.

Apparently those paying in excess of R12 000 per month in rental were the most likely to default, while those in the R3 000 - R7 000 per month bracket were the most likely to pay their rent on time and in full.

The Dispatch also picked up this story and came in with the very scary, but true headline 'More than half of all SA renters struggle to pay'.

They also had a look at the TPN report but published the five steps recommended by TPN to draw up a personal budget. Budget planning is a necessity, especially in these difficult times.

A budget can help you to know if you are living beyond your means. Don't take credit to pay off your debts unless you are intending to consolidate your debt to pay it off cheaper and easier.

Rather make sure you know exactly how much disposable income you have after deducting all of your obligations.

If you are living beyond your means it is time to cut back and take a look at those big ticket expenses, like that luxury car or designer pad.

Hey it may hurt, but you will lose much more than status if you get into a debt trap and the whole house comes tumbling down around your ears.

Just look at Carl Niehaus.

Breakfast after the budget

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Breakfast after the budget

This morning the UCT Graduate School of Business partnered up with Deloitte the tax guys to deliver a very scrummy breakfast (free if you asked for the invite! Thanks Deloitte and UCT GSB) and to have a look at the budget and what it means.

There were three speakers at the event who each had a chat about the way they see it, there was then a short panel discussion and the floor was opened to questions.

The three speakers were from Deloitte, Investec and the National Treasury. Deloitte told us that there was an ongoing tax reform process that started ten years ago already.

The Treasury has taken a long term incrementalist approach to tax reform and it is expected to continue for some years yet. The reforms are aimed at broadening the tax base and modernising the Revenue services and the methods it uses to tax.

Deloitte also expect the entire tax act to be rewritten into plainer English. It was noted that the tax submission form has been massively simplified and that the act itself was on the agenda for a plain English version.

It was envisaged that there would be major reforms of the social security aspect of tax law, specifically retirement, pension and provident funds. SARS has brought their efiling deadline for this year forward to the 20th of November.

The speaker from the Treasury is an American expert brought in as an advisor. He stated that South Africa is treated unfairly by the international investment community because we are an African developing nation.

They apply different rules to us as to them themselves.

The example he gave was of two drunks in a bar with massive tabs already, who are so drunk, and so much in debt, they just think, put it on the tab and let get drunker.

These two drunks would be the UK and the USA.

If a drunken South African then staggered into the same bar and tried to get a round on his tab, he would be thrown out by the bar tender for being under the influence.

This analogy highlights the massive bailouts going down over seas and the punishment that would be meted onto us if we were to pursue that same policy.

Trevor Manuel takes a cautious, methodical approach and slow reform rather than massive stimulus will be the way.

The Treasury decided in this budget that stimulus needs to be put directly in consumers' pockets, so they granted personal tax relief, as this will stimulate spending right away rather than cutting corporate tax, which would probably be swallowed by profit taking.

Out of the R 13.6 Billion in personal tax relief R 9 billion is to offset the recent high inflation rate and the rest is for real tax relief.

Environmental taxation was a new theme introduced in this budget and is a back burning long term project to incentivise environmentally ethical behaviour.

For example tax on cars would now be linked to carbon cost, so an SUV driver should expect to pay more tax for their big polluter.

The guy from Investec came from a conservative economic ideology that seemed at odds with the two other panellists.

Justmoney reckons that the Treasury is on a long term track that will develop and benefit our country for many years to come, and while they are massively concerned about the current state of the world economy, they know we get judged on different standards and are more worried about long term stability than protecting short term profits.

When you budget it allows you to plan for the future a bit better, so why not take that tax saving put it into a savings account and get your self a nice little bonus come year end.

Reactions to the budget

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Reactions to the budget

The budget for 2009 was presented by Trevor Manuel, The Minister Finance, yesterday.

These are some of the reactions to it from the newspapers.

The Times looked at it from a personal perspective. They interviewed an 84 year old grandmother from Soweto who felt that the increase in social spending would be a big bonus for her and enable her to put food on her family table.

She spends most of her pension income on electricity and water bills. Even this small increase of R50 will make a big difference in her life.

The Times then had a related article, also from the personal perspective of a Johannesburg mother who is employed as a real estate agent. She was feeling the pinch with the slowdown in the homeloan market and was happy about the personal tax relief.

She did however call for targeted and transparent taxes. As she put it 'I don't mind paying taxes that will go to social grants. In fact, it would be stupid for us not to pay for the poor, but I don't think the system is monitored well enough'.

If you knew that for every rand of tax collected by the Government that x cents would be spent on y then many more people would feel less antipathy to handing their money over to the government.

iAfrica reported this from Uncle Trev 'the key to budget planning is striking a balance and not just giving money away'.

An example of this is the conditions that are attached to getting child support grants ensuring that the child must be in education to qualify. Manuel put it like this 'there must be long-term benefits and it must not be dependence-producing'. These comments came from the Lion of Africa conference that took place in Cape Town.

There was another article on iAfrica that looked specifically at the budget speech and its major details calling it a 'bailout Budget'.

A third iAfrica article carried comment from an economist calling the budget 'very realistic'. The same economist said that 'While social expenditure was large, it was not out of proportion'. The issue of tax cuts however were welcome although barely enough to start addressing inflation.

Fin24 carried a number of articles looking at the Budget and where Trevor Manuel thinks we will be going. He said that it is critical to keep the economy alive, although we are not in a recession the risk was still present and that the government were aware of this.

Fin24 looked at the R13.6 billion in personal tax relief and found that experts were in general happily surprised by the scale of it, especially considering the bad business climate at the moment.

Bua News published the full text of the speech.

Justmoney will be continuing its coverage of the budget but in the meantime why don't you try out our handy budget planning tool, so you too can know where your finances stand.

Budget 2009

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Budget 2009

Trevor Manuel, one of the worlds longest standing finance ministers may well be standing down after the next budget.

It has been a long haul and Trevor has managed to institute most of the policies that were the outcome of the Codesa negotiations.

Business was scared of the left within the now ruling party and as part of the deal the type of economic policy we have seen over the last fifteen years was a direct outcome of those negotiations.

Now Trevor has come to the end of his time and as with all things may now move on.

Whether this signals a departure from the policies that have been pursued up until now remains to be seen. There are certainly a number of rumbling disgruntled voices around economic policy, but the fact is that it is entrenched in the policy and behaviour of the ruling party in government.

A few of the financial news providers have looked at the budget story for 2009 and this is what they had to say.

Moneyweb started out by noting that the budget speech would take place earlier than usual, on the 11th of February 2009, due to the early closing of parliament this year.

Traditionally Manuel delivers a vote winning budget and this one is expected to do the same. The article basically goes on to state that what they expect will be much of the same. To quote 'Fiscal discipline underpins all the conclusions reached above, and nothing less is expected of Manuel and his team'.

The big question is what will happen after Trevor is gone?

The Mail and Guardian hit it on its head with the headline 'Budget 2009: 'More of the same''. They were quoting Ernst & Young. The article looked in particular at tax cuts we could expect.

They predict a small cut in personal tax, and hold out for the possibility of a corporate tax cut. They noted that 'In the 2008/09 budget, corporates contributed 28% of revenue while contributions of individuals came in at 31%'. This means that individuals are still paying more tax than the corporations that employ them.

There are a number of dissenting views on the possible tax implications of the budget speech as pointed out by SmallCaps. Tax will either go up or go down or stay the same, in reality until the speech is delivered we won't know what will actually happen.

iAfrica carried comment that the top tax threshold may go back to 42%, Fin24said it could go higher than 40%.

Both of these quoted Ernst and Young. So where does the populism come in?

Well if you are earning in the top percentile, you don't really fit into 95% of the rest of the economy, and the tax cuts will not be for you. If you own your own company though that is where you might see the benefit.

Don't forget that the government is actively calling for Tips for Trevor. Justmoney will wait and see what happens but get a savings account anyway.