This Week's Mini-Budget Speech | The Great Wealth Transition | Foreign Pensions, and the “50, 15, 5” Savings Rule

This Week's Mini-Budget Speech

On Wednesday, our Medium Term Budget Policy Statement (MTBPS) will be presented, providing a high-level overview of the finance minister's medium-term outlook. 

In turn, the Old Mutual Investment Group (OMIG) Chief Investment Officer, Siboniso Nxumalo, was quoted in the press this week, saying that South Africa’s commodity windfall is expected to seep into the broader economy, boosting banks, retailers and property stocks as stronger prices improve the fiscal outlook and support lower interest rates, according to the Old Mutual Investment Group. 

“The surge in precious metals prices has already lifted corporate tax receipts and dividends, creating positive second-round effects for the consumer economy,” says Siboniso. “Historically, when there’s been a commodity boom, there are spillover benefits into the economy, which then benefit consumer markets.”

South Africa, the world’s biggest source of platinum-group metals and the 12th largest gold producer, is riding a commodities upswing fueled by metal shortages, heavy central-bank bullion buying and safe-haven flows, and improving domestic rail-and-port export capacity.

The jump has contributed to the FTSE/JSE Africa All Share Index heading for its best annual performance since 2009, led by mining stocks. In the last commodity upcycle in 2021, the mining industry made up roughly half of South Africa’s corporate tax revenues, Nxumalo said.

(This is not half of all our taxes, but only half of our corporate taxes, excluding all other taxes). 

“We’ve benefited from holding precious-metals companies,” Nxumalo said. “Now we’re looking at clothing retailers,” as the wealth effect spills over and gross domestic product typically rises about 0,6% within 12 to 18 months of a commodity upswing, he added.

Alexander Forbes Chief Economist Mpho Molopyane, weighed in saying, “the surge in commodities, particularly gold”, will bolster revenues. “We anticipate a positive medium-term budget policy statement, with deficits declining faster than previously expected. With inflation moderating, there could be an additional 100 basis points of interest rate cuts ahead.”

Lower borrowing costs would lift rate-sensitive sectors such as banks and property. At the same time, a stronger fiscal position and potential rating upgrades could support the rand and local bonds, Molopyane said.

Molopyane and Nxumalo also said the positive outlook is being reinforced by reforms and a more stable macroeconomic backdrop.

A report from the National Treasury last week outlined that nearly half of the government’s 30 priority reform measures, such as restoring passenger rail services and expanding the transmission network, were either completed or on track.

“This year seems to be different,” Nxumalo said. “We’re beginning to see progress on structural reforms, and the macro policy space is improving.”

You can read the full article shared on Wednesday in the Daily Investor by clicking on this link below; 

South Africa’s saving grace – Daily Investor

More than $70tn of Inherited Wealth over the Next Decade will Widen Inequality, Economists Warn

An expert panel says the report on the gap in global wealth between the rich and the poor highlights the need for intervention by the G20.

The report found inequality was growing in more than eight in 10 of the world’s countries. An expert panel says the report on the gap in global wealth between the rich and the poor highlights the need for intervention by the G20.

More than $70tn (£53tn) of inherited wealth will pass down the generations across the world over the next decade, widening inequality and highlighting the need for intervention by the G20 group of leading nations, a group of economists and campaigners have warned. 

In a report ahead of the G20 meetings in Johannesburg, hosted by the South African government later this month, the expert panel stated that the gap in global wealth between the rich and the poor will widen over the next decade without a permanent monitoring group, such as the UN Intergovernmental Panel on Climate Change. 

The Nobel Prize-winning economist Joseph Stiglitz said the report, commissioned by South African President Cyril Ramaphosa, found that inequality is growing in more than eight in 10 of the world’s countries.

The report stated that new analysis revealed that between 2000 and 2024, the world’s top 1% captured 41% of all new wealth, while only 1% went to the bottom 50%.

The committee said a groundbreaking study by the Italian economist Salvatore Morelli showed as much as $70tn of wealth would be passed to the next generations by 2035.

“Wealth inequalities have a forward momentum, as compound interest increases fortunes and, in the absence of effective inheritance taxes, wealth is handed down from one generation to another, undermining social mobility and economic efficiency,” it said.

For the full article, you can click on this link below;

More than $70tn of inherited wealth over the next decade will widen inequality, economists warn | Inequality | The Guardian

Wealth Debrief Exchange | The “50, 15, 5” savings rule: A bold Framework for financial freedom and investor discipline

In this episode of the Wealth Debrief Exchange, Trevor John, Head of Old Mutual International Distribution, chats with Tiaan Herselman, CFP® MBA (Cum Laude), who provides an insightful perspective on investor behaviour and long-term wealth creation. 

He shares his personal journey with the “50, 15, 5” principle - saving 50% of income over 15 years to achieve 5% real returns. 

He also delves into early financial independence, the emotional side of decumulation, and the importance of putting your money to work. 

To view this session, click on this link;

Foreign Pensions off SARS Radar, at Least for Now  

At least 10 years ago, I recall that this was a previous discussion point by Finance Minister Pravin Gordhan; yet, it simply went quiet afterwards.

This issue has been raised again over the last few months. Still, in a recent update this week, the National Treasury has withdrawn a somewhat controversial proposal to tax the foreign retirement benefits received by SA tax residents, which tax experts previously warned would detract from SA’s attractiveness as a retirement destination and lead to foreign residents leaving the country.

Treasury deputy director-general for tax and financial sector policy Chris Axelson told parliament’s finance committee on Tuesday that the proposal in the draft Tax Laws Amendment Bill was withdrawn pending further consultation.

If the tax on a foreign pension in the other country were higher, the shift to SA taxation could result in lower taxes being paid and greater disposable income, which could be a win-win situation for both the taxpayer and the SA fiscus. 

Where the double taxation agreements allowed the other country to have taxing rights on retirement income earned there, the proposed amendment would not result in any change.

In the case of the double taxation agreement with the UK, where only SA has the taxing right, the tax exemption meant that no tax was being paid, resulting in double non-taxation. “This is not a situation we want to permit and allow to continue, though it will have a big impact on those individuals if we remove the exemption,” Axelson said. 

It seems that persons enjoying foreign pension income, who are currently exempt from SA taxes, will therefore have a further reprieve for at least one more year or more.  

Supporting source: Treasury withdraws proposal to tax foreign retirement income

Financial Planning for Men: Unique Challenges and Solutions

November marks Men’s Month, a reminder that financial well-being plays an important role in every stage of life. While financial goals are universal, men often face unique pressures and expectations when it comes to providing for their families, planning for retirement, and managing long-term wealth.

Common challenges men face include:

🔵 Balancing family responsibilities with personal financial goals
🔵 Overlooking insurance or estate planning in favour of short-term needs
🔵 Taking on unnecessary investment risk to “catch up” later in life
🔵 Neglecting mental and emotional well-being tied to financial stress

The solution? A personalised financial plan that focuses on balance, building wealth while protecting what matters most. 

Friday Food For Thought