For many of us, Finance Minister Tito Mboweni’s budget speech last week offered hope that we could be optimistic about our immediate financial futures.

The rand and South African bonds rallied thanks to some increased investor confidence, and Mboweni has pledged to try and reduce South Africa’s overall debt level by 2024.

However, while your average South African has been given some breathing room, thanks to a few welcome budgetary decisions, there is still a need for caution, and to focus on recovering from the losses many of us incurred last year.

Two qualified Financial Advisers – Sheila-Ann Robey, a Financial Adviser at Liberty and Irvin Tsimane, Liberty’s Inland Strategic Markets Senior Manager – have performed a careful analysis of the 2021 Budget and how you can best benefit from it.

In short, they believe that the best advice right now is to be focused on using any excess income to increase your savings, and to try and recover from the debt that was placed on many of us last year.

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“Many people were retrenched, furloughed, or took salary cuts. Markets were depressed and only started to make a comeback late last year. Savings were eroded, pensioner’s investments were reduced, and debt levels increased. Some of us were left in ruin due to the pandemic,” says Tsimane.

Putting money back in your pocket

Thanks to the decision not to raise personal income tax this year, the average working South African will be taking home a little bit more than what they did in 2020. “We do need to be careful not to let this increase fall away by spending it irresponsibly, particularly on drinking and smoking because sin tax has increased,” advises Tsimane.

Avoiding these sin tax expenses, adds Robey, is more than just a financial imperative, it can also benefit your health. “We understand why the average person in a pandemic increased spending on sin tax goods, but these tax increases will erode their funds which should ideally be used for necessities and replenishing their savings.

“It’s clear that the government is attempting to boost consumer spending to grow the economy. But it is equally important that people save as much as possible. The budget speech is a message of hope, but we need to use these new relief measures to our advantage,” she says.

“I encourage people to save wherever possible, and to try recoup the losses of 2020, particularly if we are faced with a third wave of the pandemic,” adds Robey.

Investing in recovery

Both agree that it would be prudent for those looking to invest to consider taking advantage of tax-free investments, such as a tax-free savings account, which allows you to contribute up to a maximum of R36 000 per year.

Earlier this month, the National Income Dynamics Study – Coronavirus Rapid Mobile Survey (Nids-Cram) showed that the level of unemployment which rose rapidly in the early months of South Africa’s lockdown, has already been mostly reversed.

The budget decision to reduce corporate income tax to 27% is a sign that the government is looking to encourage investment, and while this will hopefully curb the possibility of further retrenchments and pay cuts, it’s important to remain cautious. “In my view, until we see significant growth, we cannot expect retrenchments and pay cuts to automatically decline, as companies are still under financial strain.”

Advice for consumers hanging in the balance

“People should continue to be mindful of how they use money. Any windfall should be saved or used to service debt; this should be at the very top of their agenda. Everyone’s situation is unique, so it is best to consult with an expert, a Financial Adviser, or a Broker. They will help you to take advantage of investing in tax-free savings accounts, as well as in retirement annuities, as they are also tax-deductible,” says Tsimane. Extra income often means further decisions related to finances, which is why seeking advice remains a key priority to grow what we have.

“While we can be happier this year following the budget speech, we should all continue to spend within our means. Regardless of the economic climate, it is essential to save toward a rainy day and towards retirement, as the unanticipated global pandemic revealed. My advice to my clients as always is to live, spend and save in equilibrium so that all their needs, present, future, as well as unexpected, are met,” says Robey.

Forming a relationship with a trusted adviser means having a guide to help you through uncertain economic times. They can assist with advice on investments, savings, and even your household budget to avoid unnecessary spending.


This article does not constitute tax, legal, financial, regulatory, accounting, technical or other advice.  The material has been created for information purpose only and does not contain any personal recommendations. While every care has been taken in preparing this material, no member of Liberty gives any representation, warranty or undertaking and accepts no responsibility or liability as to the accuracy, or completeness, of the information presented. Liberty Group Limited is a Licensed Insurer and an Authorised Financial Services Provider (no 2409).