Share this article

Sin taxes and the fuel levy are up, but there has been some personal tax relief. Tabling a Budget of R1,1-trillion, the minister said the country’s finances were healthy.
THE City of Joburg will benefit from the government’s Cities Support Programme, which has been set up to improve spatial planning, public transport systems and the management of infrastructure in eight metropolitan municipalities.

Finance minister Pravin Gordhan (Photo: GCIS website)Finance Minister Pravin Gordhan (Photo: GCIS website)The programme, announced by Finance Minister Pravin Gordhan when he tabled his 2012/13 Budget in parliament on Wednesday, 22 February, will be rolled out in this current fiscal year.

Gordhan delivered his Budget amid concerns about the euro zone crisis, a high unemployment rate and unsteady economic growth. He said economic uncertainty would persist longer than expected. “[However] we remain steadfast in addressing the challenges of creating jobs, reducing poverty, building infrastructure and expanding our economy.”

The country’s finances were healthy and about R1,1-trillion – 32 percent of the gross domestic product (GDP) – had been budgeted for the next financial year.

Tax revenue was slightly lower than estimated in February last year, meaning that the revised estimate for 2011/12 of R739-billion was now R10-billion higher than projected in 2011’s Medium Term Budget Policy Statement.

A budget deficit of 4,6 percent of GDP was projected for the 2012/13 financial year. The government planned to reduce the deficit to 3 percent of GDP in 2014/15 and to stabilise public debt by at least 38 percent of GDP.

He said education, health and social assistance remained the largest categories of expenditure. The Budget supported job creation, with a particular focus on unemployed youth.

Personal income tax relief of R9,5-billion across all income brackets was announced, taking account of inflation to provide modest real tax relief. The minister promised further measures to increase tax compliance.

Small businesses and micro-enterprises would also receive some tax relief. The tax-free threshold for small business corporations rose to R63 556; the 10 percent rate was reduced to 7 percent and the threshold up to which this rate applied was increased to R350 000.

For taxable income above R350 000, the normal 28 percent corporate rate would apply. From March, qualifying micro-businesses within the R1-million turnover limit would have to pay turnover tax, VAT and employees’ tax just twice a year – meaning the number of returns and payments a year would drop from about 18 to two.

The levy on electricity generated from non-renewable sources would increase by 1c/kWh from 1 July to replace the current funding mechanism for energy efficiency initiatives such as the solar water geyser programme.

The general fuel levy on petrol and diesel would rise by 20c from 4 April, and the Road Accident Fund levy would increase by 8c to 88c a litre.

The increases on tobacco products would be between 5 percent and 8 percent; spirits would increase by 20 percent to R36 for a 750ml bottle and the tax on beer would go up by 10 percent to R1,01 for a 340ml can. Wine would contribute 8 percent more to the fiscus.

Gordhan said the government would strengthen financial management in the public sector, pursue value for money with the greatest possible vigour and ensure that taxpayers’ money was well used. Fraud and corruption would be combatted through changes to procurement policies and practices, and tough law enforcement.

The government would also expand infrastructure investment. About 43 major infrastructure projects would be prioritised, adding up to R3,2-trillion in expenditure.

The state had approved and budgeted for infrastructure plans of about R845-billion, under R300-billion of which would be diverted to the energy sector and R262-billion to transport and logistics projects, over the medium term expenditure framework.

The money would be invested in public service facilities such as schools and courtrooms, hospitals and rural roads. “No good project will be short of funding.”

He said the government was aware of “several weaknesses in the state’s infrastructure capacity”, which in the past had led to spending lagging behind plans.

He estimated that in 2010/11, R178-billion was spent out of a planned R260-billion, or just 68 percent. “We have to do better than that. State enterprises, municipalities and government departments all need to improve their planning and management of capital projects,” he said.

The government would step up the quality of planning, costing and project management, so that infrastructure was delivered on time, and on budget. “This means that government departments and municipalities that do not spend, underspend or mis-spend their allocated funding, will be at risk of losing the allocations.”

Officials would be held liable for misdemeanour. “The National Treasury will be pro-actively monitoring the spending of grants to ensure value for money, adherence to Expanded Public Works Programme (EPWP) targets and implementation of operational and maintenance programmes.”

Gordhan emphasized that job creation was a central priority of the government. An additional R4,8-billion was allocated to the EPWP, bringing its allocations to R77,8-billion. The community work programme received an additional R3.5-billion, giving it a total of R6,2- billion, enabling the number of people employed to rise to 332 000 in 2014/15 from 90 000 in March 2011.

Working for Water and Working on Fire receive an additional R1,1-billion, a total of R7,7-billion providing for a total of 135 000 jobs over the medium term. The non-state sector programme was allocated an additional R345-million, a total of R1,1-billion.

In the arts and culture sector, R300-million was earmarked for job creation.

Spending on education would grow from R207-billion in 2012/13 to R236-billion in 2014/15. “Additional allocations of R18,8-billion over the medium term are accommodated, including equalisation of learner subsidies for no-fee schools and expanded access to Grade R.”

About R850-million was allocated to improve university infrastructure, including student accommodation facilities.

Medium-term priorities in health spending included hospital infrastructure, a comprehensive HIV and Aids treatment and prevention programme, and more training of health professionals. The health sector was allocated R12,3-billion over the next three years; R1-billion was allocated for national health insurance pilot projects and increasing primary health care visits.

To improve health infrastructure, R450-million had been provided to upgrade about 30 nursing colleges. A further R426-million was allocated for the initial work on rebuilding five major tertiary hospitals. To accommodate the provision of antiretroviral treatment at the CD4 threshold of 350, an additional R968-million was made available over the medium term.

Expenditure on social grants would grow from R105-billion in 2012/13 to R122-billion in 2014/15. At present, nearly 16 million South Africans received social grants. Gordhan said that from April, monthly state old age pensions and disability and care dependency grants would rise by R60 a month to R1 200, or R1 220 for pensioners over the age of 75. Foster care grants would go up R30 to R770 and the child support grant would increase to R280.

The budget for transport, energy and communication services increased from R84-billion in 2012/13 to R98-billion in 2014/15, rising by an annual average of 8,4 percent. “A devolution of public transport services to metropolitan municipalities will be phased in over the period ahead, allowing for better integrated public transport networks, including rail and bus rapid transit systems,” he said.

About R4,7-billion was allocated to complete the installation of one million solar water geysers, while R600-million would be diverted to municipalities to install low-energy lighting and equipment, and R300-million was set aside for the electrification of informal settlements.

Investment in municipal infrastructure and human settlements would grow from R120-billion in 2012/13 to R139-billion in 2014/15. Additional allocations of R9,9-billion over the medium term were proposed, including informal settlement upgrading, a wastewater treatment plant in Sedibeng, bulk water systems in Sekhukhune and water systems in the OR Tambo district.

“A mortgage support facility is under consideration,” the finance minister said.

About R15,8-billion was set aside for economic services and environmental protection. The Department of Trade and Industry would receive the bulk of this funding – R5,8-billion for the manufacturing competitiveness enhancement programme and R2,3-billion for industrial development and special economic zones.

About R150-million would be given to provincial and municipal agricultural colleges.

Gordhan said the government would contribute about R5,8-billion to the total R20-billion debt associated with the Gauteng Freeway Improvement Project to reduce the toll burden. “This will reduce the debt to be repaid through the toll system and will make a steeper discount possible for regular road users,” he explained.

Economic growth
He said the South African economy had averaged about 3 percent growth a year since 2009, but with the slowdown in the global economy, real GDP growth was likely to fall to about 2,7 percent in 2012.

“We expect a recovery to 3,6 percent and 4,2 percent growth in 2013 and 2014, but these are modest rates of expansion relative to the social and developmental challenges we face and the opportunities that our mineral wealth and human capabilities offer.”

Although there was a welcome recovery in job creation last year, employment had not yet returned to its 2008 peak and the unemployment rate remained high at 23,9 percent.

The full Budget speech is available on the National Treasury website, as is the full Budget Review and other relevant documents.

Related stories:

Cash for jobs and skills
Mokonyane lays out plans
Zuma plots way ahead
Related links:

National Treasury