Upcoming budget should show SA is a growing economy

Friday, February 22, 2013

Pretoria - The upcoming Budget Speech should send a signal to the world that South Africa is a stable and growing economy, while also giving information on how the infrastructure projects will be funded, the South African Chamber of Commerce and Industry (Sacci) says.

Finance Minister Pravin Gordhan is set to deliver the national budget before Parliament next Wednesday.

Sacci chief executive officer Neren Rau said that the budget must adopt a pragmatic approach towards the management of South African public finances.

“Sacci trusts that he [Finance Minister] will send a positive signal to the world that South Africa is a stable and growing economy,” said Rau.

Business hopes that the minister will provide information on how the 18 infrastructure projects will be funded.

In the last year, the Presidential Infrastructure Coordinating Commission (PICC) has launched the intergovernmental forums of the 18 Strategic Infrastructure Projects known as SIPs.

The infrastructure programme aims to turn the country into a construction site. Economic Development Minister Ebrahim Patel has said that the programme provides jobs to more than 150 000 people across the country.

Business also hopes that Gordhan will give details on the funding of the National Health Insurance (NHI), which will be rolled out from this year.  Industry also hopes that the minster will speak to the implementation of the youth employment incentive scheme.

Last week in his State of the Nation Address, President Jacob Zuma spoke of a study into taxation that is being undertaken by National Treasury. Rau said Gordhan should expand on this.

The issue of under-spending, overspending and misspending by government departments and municipalities is what business also hopes will be addressed.

In its commentary, Nedbank said the minister faced the difficult task of placing the country’s public finances on a sustainable path in an environment of faltering economic growth, as well as growing social spending demands.

The focus of the budget was likely to remain on spending on social and economic infrastructure.

“The aim [would be on] lifting the constraints of economic growth, reducing unemployment and improving the country’s competitiveness in line with the National Development Plan,” noted the bank.

The plan aims to eliminate poverty and reduce inequality by 2030. According to the plan, South Africa can realise these goals by drawing on the energies of its people, growing an inclusive economy, building capabilities, enhancing the capacity of the state, and promoting leadership and partnerships throughout society.

 “The national budget offers the opportunity to set a clear path to deficit reduction through a sustainable combination of realistic revenue and expenditure proposals,” said the bank.

In October last year, National Treasury indicated that the country’s budget deficit is expected to widen from 4.2%  in 2011/12 to 4.8% in 2012/13 before  falling to 4.5% of Gross Domestic Product (GDP)  in 2013/14  and then narrowing to 3.1% of GDP  by 2015/16.

According to Nedbank, personal income tax relief will be limited, with lower to middle income earners likely to receive the bulk of the relief. Additionally, company tax relief is likely to be limited, with the company tax rate remaining unchanged at 28%.

Rau said that business would like Gordhan to engage stakeholders on strategies to broaden the country’s tax base so as to reduce dependence on a relatively small number of tax-payers, given the call for levies to be placed on high income earners. 

Meanwhile, the South African Institute of Professional Accountants (SAIPA) said that the minister’s Budget Speech was likely to show the strains of maintaining a balance between a sound fiscus and developmental needs.

Chairperson of the National Tax and SARS Stakeholders Committees at SAIPA, Ettiene Retief, said that former Finance Minister Trevor Manuel and the current minister have shown “great skill” in keeping the country on a sound financial footing while creating a developmental state.

"But this balancing act is becoming harder to maintain with each budget. We have too few taxpayers supporting too many grant recipients,” he said, adding that this was unsustainable.

“The answer, as the minister has repeatedly noted, is to increase the tax base by growing the economy, and expanding the tax base. It is thus imperative that the budget focuses on enabling job creation,” said Retief on Friday.

Gordhan will deliver the budget at 2pm. - SAnews.gov.za

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