Probably more South Africans than ever were frothing to hear what our Finance Minister had to say during his budget speech yesterday. Finance Minister Pravin Gordhan delivered an eloquent oration which repeated the sound phrase “We are resilient. We are committed. We are resourceful.” Reports mg:
Gordhan was well aware of demands to alleviate the plight of the poor, oversee better service delivery, aid students unable to fund their university fees, champion land reform and institute a state-wide minimum wage.
On the other hand, he heard the urgent plea to avoid a ratings downgrade to “junk” status and knew of business’s frustration with unclear policies and a fraught labour environment. He knew of the crippling drought that has pushed 50 000 people below the national poverty line and seen white maize prices soar by 140% in a year. He knew of the volatile rand that hit R17.99/$ on a memorably grim day in January, the weakened demand for resources and that inflation had broken the upper 6% bracket. He knew of a government debt-to-GDP ratio that was nearing 50% and a crippling public wage bill that was keeping South Africa’s unemployment rate of 25% from climbing even higher.
While there was heavy campaign from various parties about an increase in VAT and a decrease in government spending, Gordon did very well in relying on other taxes for income while still improving the budget of others.
Here’s a quick recap of all that might mean something to you – thanks Fin24:
• The budget deficit will fall from 3.2% in 2016/17 to 2.4% in 2018/19 (3.9% in 2015/16).
• Debt stock as a percentage of GDP is expected to stabilise at 46.2% in 2017/18 (43.7% in 2017/18).
• Government will lower the expenditure ceiling by R10bn in 2017/18 and R15bn in 2018/19 by reducing public sector compensation budgets.
• An additional R18.1bn of tax revenue will be raised in 2016/17, with R15bn more in each of the subsequent two years.
• Government has responded to new spending needs without compromising expenditure limits. An amount of R31.8bn has been reprioritised over the medium-term expenditure framework period to support higher education, the New Development Bank and other priorities.
Spending programmes over the next three years
• R457.5bn on social grants.
• R93.1bn on transfers to universities, while the National Student Financial Aid Scheme receives R41.2bn.
• R707.4bn on basic education, including R45.9bn for subsidies to schools, R38.3bn for infrastructure, and R14.9bn for learner and teacher support materials.
• R108.3bn for public housing.
• R102bn on water resources and bulk infrastructure.
• R171.3bn on transfers of the local government equitable share to support the expansion of access of poor households to free basic services.
• R30.3bn to strengthen and improve the national non-toll road network.
• R13.5bn to Metrorail and Shosholoza Meyl to subsidise passenger trips and long-distance passengers.
• R10.2bn for manufacturing development incentives.
• R4.5bn for national health insurance pilot districts.
• An amount of R9.5bn will be raised through increases in excise duties, the general fuel levy and environmental taxes.
• Limited fiscal drag relief of R5.5bn will be implemented for individuals, focusing on lower- and middle-income earners.
• Adjustments to capital gains tax and transfer duty will raise R2bn. The effective rate on capital gains tax for individuals will rise from 13.7% to 16.4%, and for companies from 18.6% to 22.4%. Transfer duty on property sales above R10m will be raised from 11% tot 13% from March1 2016.
• Government proposes to introduce a sugar tax on 1 April 2017 to help reduce excessive sugar intake.
• A tyre levy will be implemented, effective October 1 2016.
• The general fuel levy will be raised by 30c/litre to R2.85/l for petrol and R2.70/l for diesel, effective April 6 2016. The Road Accident Fund levy will stay the same on 154c/l as it will be replaced by the Road Accident Benefit Scheme.
• Tax credits on medical scheme contributions are increased to maintain the current level of relief in real terms.
• The plastic bag levy is increased from 6c to 8c per bag.
• Personal income tax will bring in 37.5% of government revenue, company tax 16.9%, VAT 25.6% and fuel levies 5.5%.
Sin taxes hikes
Beer 11c/340ml; fortified wine 27c/750ml; ciders and alcoholic fruit beverages 11c/340ml; unfortified wine 18c/750ml; sparkling wine 59c/750ml; spirits 394c/750ml; cigarettes 82c/packet of 20; cigarette tobacco 94c/50g; pipe tobacco 27c/25g; cigars 432c/23g.
• GDP growth is estimated 1.3% in 2015, 0.9%% in 2016, 1.7% in 2017 and 2.4% in 2018. This is considerably lower than last year’s estimates.
• Export growth is expected to grow by 9.5% in 2015, 3.0% in 2016 and 4.6% in 2017 while imports will grow an estimated 5.3% in 2015, 3.7% in 2017 and 4.5% in 2017.
• Consumer inflation will fall to 4.6% in 2015, accelerate to 6.8% in 2016 and is then forecast to consolidate somewhat at 6.3% in 2017 and 5.9% in 2018.
• Capital formation is forecast to grow by only 1.1% of GDP in 2015, 0.3% in 2016, 1.4% in 2017 and 2.7% in 2018.
• Household comsumption is set to grow by 1.4% in 2015, 0.7% in 2016, 1.6% in 2017 and 2.2% in 2018.
• The balance of payments wil stay in deficit (-4.1% of GDP in 2015, -4.0% in 2016, -3.9% in 2017 and 2018).
Social Grant increases
• State old age grant from R1 415 to R1 505 per month.
• State old age grant for over 75s from R1 435 to R1 525.
• War veterans grant from R1 435 to R 1 525.
• Disability grant from R1 415 to R 1 505.
• Foster care grant from R860 to R890.
• Care dependency grant from R1 415 to R1 505.
• Child support grant from R330 to R350.
Got it? Hmm, well if you need the information in graphs and bars, Standard Bank and Fin24 created a pretty epic infographic:
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