Budget Speech 2022 Insights and Commentary from Discovery

Key executives from Discovery Ltd provide commentary and snippets following Finance Minister Enoch Godongwana’s National Budget Speech presented this afternoon, Wednesday 23 February 2022:

General comments:

“I welcome both the reduction in the corporate tax rate as well as the introduction of the R20bn bounce-back scheme for SMEs, which shows that the budget is starting to give effect to the President’s recognition that it is both small and large businesses that create jobs. This is an encouraging step. We now need to keep improving the ease of doing business to unleash the private sector’s full potential to help build our country.”

Adrian Gore, Discovery Chief Executive

“On the whole, this was a positive budget. For a start, so-called fiscal drag was reduced through the Minister’s announcement that tax brackets would be adjusted by 4.5% to reflect inflation. Another positive was the confirmation of the reduction in the company tax rate from 28% to 27% although only starting on 31 March 2023.”

Harry Joffe, Head Legal Services - Discovery Life and Discovery Life International

On fiscal allocation to provincial health departments:

“We congratulate the Honourable Finance Minister Enoch Godongwana on his maiden budget, which is geared towards stimulating economic growth. We particularly welcome the increased fiscal allocation towards strengthening critical public services, specifically the financial allocation to provincial health departments in support of their continued response to COVID-19. We are hopeful that, together with private sector partners, in continuation of the solidarity developed during the Country’s response to Covid-19, this can build towards an integrated health system to enhance access to high quality, affordable care and improved clinical outcomes for all South Africans.”

Dr Ryan Noach, CEO: Discovery Health

On Medical Scheme Tax Credits

“The welcomed 4.5% increase of medical scheme tax credits is a progressive mechanism of enhancing access to healthcare, keeping pace with wage inflation. This preferentially benefits lower income employees in the formal employment sector to retain their medical scheme cover. In the context of current regulatory considerations of Low Cost Benefit Options (LCBOs), this could potentially supplement employer contributions to avail access to affordable primary healthcare cover for lower income employees. This is a critical consideration for social benefit and economic productivity while easing the burden on public sector resources.”

Dr Ryan Noach, CEO: Discovery Health

On the SA Revenue Service (SARS):

“We share the minister’s pleasure at the progress made at the SA Revenue Service, which has been substantially rebuilt in the last year. This will go a long way in sustaining high revenue collection. Interestingly, from 2023 provisional taxpayers with assets over R50 million will need to declare assets and liabilities at market values as SARS aims to ascertain the true levels of wealth in the country. This was a recommendation of the Davis Tax Committee, with a view to establishing the true levels of wealth in the country before implementing tax amendments.”

Harry Joffe, Head Legal Services - Discovery Life and Discovery Life International

On COVID-19 vaccine funding and Public-Private Collaboration

“With the uncertainties around the future of the COVID-19 pandemic, the ongoing commitment to vaccine funding is critical. Discovery Health data shows unequivocally that Covid vaccination materially reduces risk of severe disease and death, and is extremely safe. We have learnt a great deal about effective public-private partnerships across both payer and provider healthcare markets, through the effective implementation of the national government-led vaccination programme. Emerging from this, there is a great opportunity to leverage all the expertise and resources across both the public and private healthcare sectors to broaden access to high quality healthcare for all, and to consider applications of these insights to other areas of need, such as non-communicable diseases.”

Dr Ryan Noach, CEO: Discovery Health

On retirement funds:

“We’re pleasantly surprised to see that retirement funds will have the freedom to invest up to 45% offshore (from the prior 30% limit) – there will certainly be some market conditions where that flexibility allows us to add value to the portfolios through greater offshore allocation.”

Guy Chennells, Head of Product: Discovery Employee Benefits

“The minister also announced that changes to double tax treaties relating to cross border tax treatment for tax emigrants and their retirement funds would begin. This is a fairer solution to taxpayers than a drastic amendment of the income tax act, such as was proposed last year, whilst still ensuring that South Africa obtains taxing rights on retirement fund money, even when the tax-emigrant becomes tax resident elsewhere.”

Harry Joffe, Head Legal Services - Discovery Life and Discovery Life International

“With regard to the two-pot system being implemented for retirement funds, we support the attempt to balance the desperate financial needs of people with the need to ensure that their retirement savings are not depleted.”

Harry Joffe, Head Legal Services - Discovery Life and Discovery Life International

“We are glad to see the two-pot system moving ahead and are well-positioned for a world where a person could access a third of their savings at any point – in this world incentives and behavioural influence is imperative to help people to resist the bias toward cash and immediate gratification until retirement. We can expect to see the details based on industry input later in the year and would need at least a year to make the system changes, so this will not become reality in the next 12 months, but the signal is clear that it is coming and will move quickly through the legislative process.”

Guy Chennells, Head of Product: Discovery Employee Benefits