SouthAfrica.info (Johannesburg)

26 February 2013

South Africa: Business Looks to Gordhan's Budget

Finance Minister Pravin Gordhan's 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 country's infrastructure projects will be funded, says the South African Chamber of Commerce and Industry (Sacci).

Gordhan will deliver his Budget speech in Parliament in Cape Town at 2pm on Wednesday.

Infrastructure funding

Sacci chief executive officer Neren Rau said on Friday that the Budget should adopt a pragmatic approach towards the management of South Africa's public finances - and provide information on how the 18 major strategic infrastructure projects (SIPs) identified by the government last year will be funded.

The Presidential Infrastructure Coordinating Commission (PICC) has launched the intergovernmental forums of the 18 SIPs.

The massive state-led infrastructure programme aims to turn the country into a construction site. Economic Development Minister Ebrahim Patel said last week that the programme already provides jobs to more than 150 000 people across the country.

Rau said business also hoped that Gordhan would give details on the funding of the National Health Insurance (NHI), which will be rolled out from this year, as well as speak to the implementation of the youth employment incentive scheme.

In his State of the Nation Address earlier this month, President Jacob Zuma spoke of a study into taxation that was being undertaken by the National Treasury. Rau said Gordhan should expand on this.

The issue of under-spending, overspending and misspending by government departments and municipalities should also be addressed, Rau added.

'Difficult balancing act'

In its commentary ahead of the Budget, Nedbank said Gordhan faced the difficult task of keeping the country's public finances on a sustainable path in an environment of faltering economic growth coupled with growing social spending demands.

"The National Budget offers the opportunity to set a clear path to deficit reduction through a sustainable combination of realistic revenue and expenditure proposals," the bank said.

In October last year, National Treasury indicated that the country's budget deficit was expected to widen from 4.2% of gross domestic product (GDP) in 2011/12 to 4.8% in 2012/13 before falling to 4.5% in 2013/14 and narrowing to 3.1% by 2015/16.

The focus of the Budget was likely to remain on spending on social and economic infrastructure, the bank said.

"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."

The National Development Plan (NDP) is a blueprint for eliminating poverty and reducing 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.

According to Nedbank, personal income tax relief would be limited in this year's Budget, with lower- to middle-income earners likely to receive the bulk of the relief. Additionally, company tax relief was likely to be limited, with the company tax rate expected to remain unchanged at 28%.

Broadening the country's tax base

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 taxpayers, given the call for levies to be placed on high-income earners.

Meanwhile, the South African Institute of Professional Accountants (SAIPA) said that the 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 the SAIPA, Ettiene Retief, said that former Finance Minister Trevor Manuel and the current minister had 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," Retief said.

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