Cape Town – Finance Minister Pravin Gordhan had a tough
message for South Africans in Wednesday's Budget Speech in the National
Assembly, with the introduction of a new tax bracket for the very rich,
state debt creeping up and almost all economic indicators and fiscal
numbers weaker than in last year's budget.
While South Africa is
"once again at a crossroads" and "tough choices have to be made to
achieve development outcomes", Gordhan nevertheless tried to stress the
need for growth.
He used the word “transformation” more than 50
times in his speech, but against this background said: “Our growth
challenge is intertwined with our transformation imperative. We need to
transform in order to grow, we need to grow in order to transform.
Without transformation, growth will reinforce inequality; without
growth, transformation will be distorted by patronage."
He also indicated that fiscal consolidation will continue.
An
additional R28bn will be collected in the coming financial year by
means of those earning more than R1.5m per year paying 45% of that back
to the taxman (the previous top rate was 41%), limited adjustment for
bracket creep, a fuel levy rise of 30 cents per litre, a higher dividend
withholding tax rate and the usual rise in sin taxes (excise on alcohol
and tobacco).
There was relief for property buyers with the
first R900 000 (previously R750 000) of the value of a transaction not
liable for transfer duty.
Social grants were increased by about 7% on average.
While
it looks like Gordhan made an effort to appease his critics, one could
not help feelings of sadness listening to him and getting the impression
that it was his last budget after making his comeback as finance
minister just more than a year ago.
The highlights of the budget are:
Macro-economic outlook
•
Gross domestic product growth will gradually improve from 0.5% in 2016
to 1.3% in 2017 and 2.0% in 2018, supported by improved global
conditions and rising consumer and business confidence. The percentages
are considerably lower than last year’s estimates. The review says
though that greater availability and reliability of electricity should
also support stronger growth in 2018/19.
• Exports are expected
to grow by 1.9% in 2017, 4.9% in 2018 and 5% in 2019, after estimated
negative growth of -1.2% last year.
• After reaching 6.4% in 2016, consumer inflation is expected to decline to 5.7% in 2018.
• The current account deficit, after reaching 4% in 2016, will come down to 3.7% in 2018 and 3.8% in 2019.
• Government will continue to enable investment through regulatory reforms and partnerships with independent power producers.
•
Public sector infrastructure bottlenecks will be addressed through
reform and capacity building. During 2017/18, government will establish a
new financing facility for large infrastructure projects.
Budget framework
•
The budget deficit (consolidated) crept up to 3.4% for 2016/17 from the
3.2% stated in last February’s budget. This was due to less revenue
collected than expected. The deficit is expected to narrow to 3.1% for
2017/18 and 2.6% in 2019/20.
• State debt is also steadily
creeping up. Debt stock as a percentage of GDP is expected to stabilise
at 48.2% in 2020/21 (previously 46.2% in 2017/18, and before that 43.7%
in 2017/18).
• The main budget non-interest expenditure ceiling
has been lowered by R26bn over the next two years (almost the same as
the R25bn planned last year).
• An additional R28bn (R18.1bn
last year) of tax revenue will be raised in 2017/18. Measures to
increase revenue by a proposed R15bn in 2017/18 will be outlined in the
2018 Budget.
• R30bn has been reprioritised through the budget process to ensure core social expenditure is protected.
•
Real growth in non-interest spending will average 1.9% over the next
three years. Apart from debt-service costs, post-school education is the
fastest-growing category, followed by health and social protection.
Specific spending programmes over the next three years
Over the next three years, government will spend:
• R490bn (R457bn last year) on social grants.
•
R106bn (R93.1bn) on transfers to universities, while the National
Student Financial Aid Scheme will spend R54.3bn (R41.2bn).
•
R751.9bn (R707.4bn) on basic education, including R48.3bn for subsidies
to schools, R42.9bn for infrastructure, and R12.7bn (R14.9bn) for
learner and teacher support materials.
• R114bn (R108.3bn) for subsidised public housing.
• R94.4bn (R102bn) on water resources and bulk infrastructure.
• R189bn (R171.3bn) on transfers of the local government equitable share to provide basic services to poor households.
• R142.6bn to support affordable public transport.
• R606bn on health, with R59.5bn on the HIV/Aids conditional grant.
Tax proposals
•
A new top marginal income tax bracket for individuals combined with
partial relief for bracket creep will raise an additional R16.5bn.
•
R6.8bn will be collected through a higher dividend withholding tax
rate. Increases in fuel taxes and alcohol and tobacco excise duties will
together increase revenue by R5.1bn.
• As soon as the
necessary legislation is approved, government will implement a tax on
sugary beverages. The rate will be 2.1c per gram for sugar content above
4g per 100 ml.
• A revised Carbon Tax Bill will be published for public consultation and tabling in Parliament by mid-2017.
•
The first R900 000 of the value of property acquired from March 1 2017
will be taxed at zero percent. Before March 1 2017 the first R750 000 of
the value of property was taxed at zero percent.
• The general
fuel levy will increase by 30c/litre on April 5 2017. This will push the
general fuel levy up to R3.15/litre of petrol and to R3.00/litre of
diesel. The road accident levy will increase by 9c/litre of petrol and
diesel on April 5 2017.
• Personal income tax will bring in
R482bn, VAT R312bn, company tax R218bn, fuel levies R96.1bn and customs
and excise duties R96bn in the coming year.
Sin taxes rise
Taxes on alcohol and tobacco are set to rise as follows:
Beer 12c/340ml;
Fortified wine 26c/750ml;
Ciders and alcoholic fruit beverages 12c/340ml;
Unfortified wine 23c/750ml;
Sparkling wine 70c/750ml;
Spirits 443c/750ml;
Cigarettes 106c/packet of 20;
Cigarette tobacco 119c/50g;
Pipe tobacco 40c/25g; and
Cigars 658c/23g.
Social grant spending and increases
Spending
on social grants is set to rise from R164.9bn in 2016/17 to to R209.1bn
by 2019/20, growing at an annual average of 8.2% over the medium term.
The number of social grant beneficiaries is expected to reach 18.1
million by the end of 2019/20.
The specific increases are:
• State old age grant from R1 505 to R 1 600 per month;
• State old age grant, over 75s from R1 525 to R1 620;
• War veterans grant from R1 525 to R 1 620;
• Disability grant from R1 505 to R 1 600;
• Foster care grant from R890 to R920 ;
• Care dependency grant from R1 505 tot R1 600; and
• Child support grant from R355 to R380.
