Wednesday last week Tito Mboweni delivered the revised 2020 Budget and it was not pretty. In the February 2020 Budget, government had forecast a GDP growth rate of 0,9% in 2020, now Treasury expects GDP growth to be -7,2% in 2020.
On the tax side, SARS expects a massive R304,1 billion below the budgeted tax revenue as outlined in February. A big part of this decline can be attributed to the wealthy, successful SA taxpayers emigrating. To make things worse, Mauritius has just announced a 50% cut in their migration policy. If you invest $50 000 in the country, you can obtain a 10-year occupation permit for your whole family, including your parents, and live there as a non-citizen. The South African tax base is already very thin and with an economy in free fall, government cannot afford to lose those few who actually pay tax.
So, our main budget deficit will go from an initial estimate of -6,8% of GDP to -14,6% of GDP in 2020/21; government debt will go from 63,5% of GDP in 2019/20 to 81,8% of GDP in 2020/21; increasing further to 87,4% of GDP by 2022/23. Let us leave it there. It is clear that we have a situation in South Africa where things have gone from bad to worse, but if we sit back and think about it, there is a very simple solution for South Africans who want to stay here. We have mentioned on numerous occasions that there is no reason why you have to live and invest in the same place. As a lifestyle destination South Africa ranks as one of the best in the world. Yes, we have to pay for additional personal security; yes, we have to avoid certain areas; yes, we have to be street-smart when doing business and endure bad service delivery; but we have fantastic people, beautiful beaches, mountains and wildlife reserves.
As we have said before, South Africa is not the same place it was even 10 years ago. The world has changed and we are not playing in the premier league any longer, but technology has changed the way we can do business and manage our investments. You are allowed to take R1 million overseas every year without any clearance certificate, and up to R10 million with approval from SARS and the Reserve Bank. The system allows you to diversify your wealth and become a shareholder in the best companies money can buy with the click of your finger from your rondavel in the Kruger National Park. There is no need to worry about your cash reserves in South Africa designated for living expenses or your primary residence (those can all stay invested in SA), or even that portion of your longer-term investments that you prefer putting into risky assets like SA equity. But, for the protection of your wealth and peace of mind over the longer term, you need that international equity portfolio.