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.<\/p>\n
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.<\/p>\n
He used the word \u201ctransformation\u201d more than 50 times in his speech, but against this background said: \u201cOur growth challenge is intertwined with our transformation imperative. We need to transform in order to grow, we need to grow in order to transform.<\/p>\n
Without transformation, growth will reinforce inequality; without growth, transformation will be distorted by patronage.”<\/p>\n
He also indicated that fiscal consolidation will continue.<\/p>\n
An additional R28 billion will be collected in the coming financial year by means of those earning more than R1.5 million 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).<\/p>\n
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.<\/p>\n
Social grants were increased by about 7% on average.<\/p>\n
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.<\/p>\n
The highlights of the budget are:<\/strong><\/p>\n Macro-economic outlook<\/p>\n \u2022 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\u2019s estimates. The review says though that greater availability and reliability of electricity should also support stronger growth in 2018\/19.<\/p>\n \u2022\u00a0 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.<\/p>\n \u2022 After reaching 6.4% in 2016, consumer inflation is expected to decline to 5.7% in 2018.<\/p>\n \u2022 The current account deficit, after reaching 4% in 2016, will come down to 3.7% in 2018 and 3.8% in 2019.<\/p>\n \u2022 Government will continue to enable investment through regulatory reforms and partnerships with independent power producers.<\/p>\n \u2022 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.<\/p>\n Budget framework<\/strong><\/p>\n \u2022\u00a0 The budget deficit (consolidated) crept up to 3.4% for 2016\/17 from the 3.2% stated in last February\u2019s 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.<\/p>\n \u2022\u00a0 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).<\/p>\n \u2022\u00a0 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).<\/p>\n \u2022 An additional R28\u00a0billion (R18.1\u00a0billion last year) of tax revenue will be raised in 2017\/18. Measures to increase revenue by a proposed R15\u00a0billion in 2017\/18 will be outlined in the 2018 Budget.<\/p>\n \u2022 R30 billion has been reprioritised through the budget process to ensure core social expenditure is protected.<\/p>\n \u2022 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.<\/p>\n Specific spending programmes over the next three years<\/p>\n Over the next three years, government will spend:<\/p>\n \u2022 R490\u00a0billion (R457\u00a0billion last year) on social grants. Tax proposals<\/strong><\/p>\n \u2022 A new top marginal income tax bracket for individuals combined with partial relief for bracket creep will raise an additional R16.5 billion.<\/p>\n \u2022 R6.8\u00a0billion 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.<\/p>\n \u2022 As soon as the necessary legislation is approved, government will implement a tax on sugary beverages. The rate will be 2.1 cents per gram for sugar content above 4g per 100 ml.<\/p>\n \u2022 A revised Carbon Tax Bill will be published for public consultation and tabling in Parliament by mid-2017.<\/p>\n \u2022 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.<\/p>\n \u2022 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.<\/p>\n \u2022 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.<\/p>\n Sin taxes rise<\/strong><\/p>\n Social grant spending and increases<\/strong><\/p>\n 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.<\/p>\n The specific increases are:<\/p>\n
\n\u2022 R106\u00a0billion (R93.1 billion) on transfers to universities, while the National Student Financial Aid Scheme will spend R54.3\u00a0billion (R41.2 billion).
\n\u2022 R751.9\u00a0billion (R707.4 billion) on basic education, including R48.3\u00a0billion for subsidies to schools, R42.9\u00a0billion for infrastructure, and R12.7\u00a0billion (R14.9 billion) for learner and teacher support materials.
\n\u2022 R114 billion (R108.3 billion) for subsidised public housing.
\n\u2022 R94.4\u00a0billion (R102 billion) on water resources and bulk infrastructure.
\n\u2022 R189\u00a0billion (R171.3 billion) on transfers of the local government equitable share to provide basic services to poor households.
\n\u2022 R142.6 billion to support affordable public transport.
\n\u2022 R606\u00a0billion on health, with R59.5\u00a0billion on the HIV\/Aids conditional grant.<\/p>\n\n
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