Durban - Finance Minister Tito Mboweni tabled the country's 2020 budget in Parliament on Wednesday, where he addressed pressing matters such as Eskom debt, social grants and sin tax.
Mboweni announced increases in welfare grants in his budget speech, which also gives income tax relief to South Africans.
The minister said old age, disability and care dependency grants would go up R80 a month to R1 860. War veterans will get the same monthly increase.
The foster care grant will rise by R40 to R1 040 a month, while R20 will be added to the child support grant to R445.
He said he had resisted calls to raise taxes, notably value-added tax, because South Africans were already feeling the pinch of an economy forecast to grow only 0.9 percent in 2020/21.
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Instead, the minister announced income tax relief on sliding scale.
"Our income tax system is progressive, and the adjustments reflect this. Someone earning R10,000 a month will pay 10 percent less in tax. Someone earning R100 000 a month will pay about 1.5 percent less tax."
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He said raising VAT in the current economic climate would have been "foolhardy".
However, Mboweni announced increases to "sin tax" which he said will be effective immediately.
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The cost of a 340ml can of beer or cider would increase by 8c, a 750ml bottle of wine would increase by 14c, a 750ml bottle of sparkling wine would cost an extra 61c, and the cost of a bottle of 750 ml spirits, including whisky, gin or vodka, would increase by R2.89.
A box of 20 cigarettes would cost an extra 74c, 25 grams of piped tobacco would cost 40c more, while a 23 gram cigar would cost an extra R6.73.
"In line with department of health policy, we will start taxing heated tobacco products, for example hubbly bubbly. The rate will be set at 75% of the rate of cigarettes. Electronic cigarettes, or so-called vapes, will be taxed from 2021."
He also vowed to crack down on illicit and criminal economic activities.
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The South African government is expected to set up a sovereign wealth fund with a target capital amount of about R30 billion or US$2 billion.
According to the finance minister, a sovereign wealth fund was an important long-term tool for saving and investment for future generations and could also contribute to strengthening the fiscal framework.
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On the issue on the debt of struggling power utility, Eskom, Mboweni said using pension fund savings administered by the Public Investment Corporation (PIC) to slash state power utility Eskom's debt - as proposed by labour federation COSATU - was not a bad idea to convert savings into equity, but added the measure should apply to the private sphere as well if implemented.
"It is not a bad idea actually but we must be very careful that we are not suggesting only public service workers pensions are to be used," he told a media briefing before tabling the 2020 national budget in Parliament.
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"It must not be about the public service pension but all pensions."
He confirmed that the state had allocated R230 billion over ten years to achieve the restructuring of the energy sector and said current electricity shortages which have forced a return to scheduled rolling blackouts would ease as Eskom completed critical maintenance work.