Tag: Press Releases

The 2022 Budget Speech and how it affects your retirement and investments.

One can liken The minister’s speech to the classic game of Jenga, where the focus was on preventing the tower from falling apart but still strategically removing certain blocks from the structure. Essentially it was a budget that was designed to strike a balance between keeping money in the pockets of South Africans while still supporting economic growth.

Cautiously Optimistic

While this might come as a surprise to most, the state of South Africa’s economy is actually far less hostile than when the former finance minister Tito Mboweni read his version of the Budget Speech over a year ago after the world economy went into a recession because of the Covid 19 pandemic. One of the key drivers of this was a spike in commodity prices on the back of the economic rebound, which benefited South Africa because it resulted in a much high than anticipated mining tax revenue, and this gave the government much-needed breathing space on the fiscal front.

Overall The estimated tax revenue collection for 2021/2022 is R1.55 trillion, which is R182 billion more than last year’s estimate. This is mostly as mentioned from the mining sector, but personal income tax and value-added tax also played a role in this increase.


In the main, there aren’t any taxation increases on the cards in terms of investments this year. This comes as a welcome reprieve because the two taxes that hit investors the hardest were dividend withholding tax and capital gains tax (CGT). The capital gains tax inclusion rate for individuals and special trusts remains at 40%, and for other taxpayers at 80%.

Dividends tax remains at 20% on dividends paid by resident and non-resident companies for shares listed on the JSE. Foreign dividends received by individuals from foreign companies (shareholding of less than 10% in the foreign company) are taxable at a maximum effective rate of 20%.

Retirement lump sum taxation

There weren’t any changes announced in terms of retirement fund contributions. The first R500 000 of a retirement lump sum remains tax-free. The maximum retirement fund contribution an individual can make is still limited to 27.5% of taxable income. It is further limited to R 350 000 or 27.5% of taxable income before the inclusion of a taxable capital gain. The amounts contributed to pension funds, provident funds and retirement annuities can still be deducted within limits during the course of a tax year to reduce tax liability, but smart planning and execution can put money back into your pocket.

Retirement funds will have more flexibility to allocate a greater % offshore
While retirement funds have the most attractive incentives, they have been heavily denigrated for their rigidity in terms of where funds can allocate their capital. Under current legislation, only 30% of the portfolio can be invested offshore, but going forward there are plans in place to raise that cap to 35%. Coupled with this, the treasury is drafting regulations that will allow investors to access a portion of their retirement portfolio before their retirement age in cases of emergency.

Value Added Tax

VAT is charged on the supply of goods and services provided by registered vendors. It remains unchanged at 15%. Alongside ‘sin tax’, this is another tool used by the government to guide the population towards reduced consumption and more saving and investment.

Estate Duty

Estate duty is applied on the property of a deceased South African as well as property belonging to a non-resident of South Africa. Currently, the taxable estate duty is 20% on an estate worth less than R30 million and if it is above that benchmark it is 25%. The minister suggested that no changes would be effected in the 2022 budget.


In conclusion, not much has changed in the financial landscape apart from the changes made in sin tax, therefore Investments and retirement funds held with Aluma will not be affected by the latest budget speech.

However, the fact that there haven’t been any significant escalations in taxation, coupled with personal tax relief through an adjustment in personal income tax brackets and rebates means that individuals should see a net increase in their take-home pay, which leaves more money available to invest. Overall, this year’s budget speech provides an opportune moment to contact Aluma to revise your financial wellness and investments to see where this additional capital can be deployed and go to work for you.

Cashing in on retirement funds

In Minister of Finance, Enoch Godongwana’s maiden budget speech yesterday (23 February 2022), he spoke about government’s proposal to fundamental change the retirement system which will allow partial access to their funds.

Said Godongwana, “Part of this proposal includes the possibility of short-term access, which would be dependent on the approval by trustees of each fund. Consultations are proceeding following the release of a discussion paper last year and the draft legislation on these amendments will be published for comment in the middle of the year”.

“While many South Africans may access the funds to settle debt or for living expenses, there are many that could consider using access to the funds to invest the money in financial products into products that could offer higher returns,” said Dwayne De Waal, COO from diversified asset and fund management firm, Aluma Capital Investments.

De Waal says that depending on the risk profile of the portfolio, a retirement product offered may earn a limited return, but other investment products have the potential to offer higher returns.

One option is to look at multi-asset global notes.

“What makes offshore investing so attractive is that no matter where the Rand stands against the dollar or how it fluctuates, investors are still able to look at a conservative 8% year-on-year dollar based return,” says De Waal.

He adds that even though the Rand has a tumultuous relationship with the US dollar, that offshore investments, especially if they come with capital protection, often present a better investment opportunity. The rand was at 13,40 to the dollar 5 years ago and now it’s at 15,40 to the dollar. That’s a 15% devaluation over the last years on the currency alone.

He does warn though that when drawing a portion of retirement savings that policy holders need to take care to protect the capital. “Don’t put the money in the bank where inflation and costs will eat away at its value,” he said.

“Multi-asset global notes can also be paired with the ability to give a client a gearing with a bank guarantee they can potentially earn returns north of 20% with no capital risk,” said De Waal.

Van Niekerk is interested to see which retirement funds will make use of the proposed changed in legislation. “The decision as to whether investors can access a partial portion of their investment savings will be at the discretion of the trustees of the fund,” he said.

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