27 February 2013

South Africa: Sacci Analysis of the National Budget 2013

Photo: GCIS
South Africa's Finance Minister Pravin Gordhan (left) ahead of the 2013 budget speech.

In a media statement released today, the CEO of the South African Chamber of Commerce and Industry, (SACCI) Mr Neren Rau, said:

Quote: The Budget Speech was an important signal that constructive dialogue between government and the South African business community is necessary to support business confidence. The Fiscal space has decidedly narrowed over the past year and the need for collaboration between social partners is more important than ever.

SACCI welcomes the following:

The recognition given to the National Development Plan (NDP) as the primary foundation for long-term economic policy and serves as a common vision of the future.

The status update on the establishment of the office of the Chief Procurement Officer (CPO). The CPO may in time become a crucial measure to address the under-spending, overspending and misspending by government departments and municipalities.

The creation of the Small Enterprise Financing Agency and the simplification of tax requirements for SMEs.

The confirmation of the roll-out of a youth employment incentive scheme.

The details on the financing strategy of the various infrastructure programmes, although more details on the role of the private sector is necessary.

The promise of negotiating tax incentives in the Special Economic Zones (SEZs).

The commitment to control the growth in government spending. Programmes relating to the green economy.

Revision of the allocation of funding to local authorities and the need for them to provide plans.

The commitment to address fraud and corruption in the public service.

SACCI is concerned that:

Details on the funding model of the National Health Insurance Scheme are still outstanding, and the announcement that the NHI could be funded by higher taxes is highly concerning.

No definite timelines on the investigation into tax policy reviews as stated in both the State of the Nation Address and the budget.

The cost of the increase in the fuel levy and the carbon tax on an energy intensive economy will increase the cost of doing business and have a particularly negative impact on the small and medium enterprises which already facing severe sustainability challenges.

No information was given on how the public wage bill will be moderated to sustainable levels.

SACCI recognises that the fiscus is under strain and congratulates the Minister on providing investors with the reassurance of a responsible budget that supports economic stability. The temptation to increase taxation of the existing tax base is high but this will not be necessary if the correct measures are taken to cut unnecessary government spending.

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