SA’s Budget: Bridging an ever-widening gap
With absolutely no room t o manoeuvre a ny more, finance minister Nhlanhla Nene is f illing what he calls a “structural gap” between government’s ever-growing revenue requirements and increasingly unachievable projected tax proceeds by hiking taxes on a number of levels.
These include a one percentage point increase in personal tax, an 80.5c a litre increase in fuel taxes, higher transfer duties and the possibility of increased electricity “levies”. Tax hikes will bring in an additional R16.8bn revenue in 2015/16 to a national budget that is strained at almost every level (see graphs on page 12).
Nene t a l k e d a b out a budget constrained by the need to consolidate public finances “in the context of slower growth and rising debt”.
His biggest problem is tax revenue, which was just R979bn, or R14.7bn less than the budget estimate a year ago – a symptom of the slowing economy.
Nene said that tax from businesses ref lects the “slowdown in business conditions”, while personal income tax “remains a buoyant source of revenue” – hence his intention to increase it.
The main tax changes are: To appease unions and South Africans with low incomes, there has been no increase in VAT.
Government expects slow economic growth in the medium term – from 2% in 2015 to 3% in 2017/18, largely due to the power crisis, or “electricity challenge” i n Nene’s words. Nene concedes t hat t his i s well below growth expectations for emerging and developed economies.
“It is now clear that we can no longer postpone consideration of additional revenue measures,” he said.
Government will spend R25bn less over the next t wo years, revise its spending plans and “consolidate” government jobs, but there is very little change in government’s plans to cut expenditure from those mentioned in previous years, apart from the addition of a contingency reserve of R5bn next year, rising to R45bn in 2017/18 to allow for new spending priorities that may come up.
Like Pravin Gordhan before him, Nene has promised that government will rein in on expenditure, cutting spending on catering, entertainment and venues by 8% and travel and subsistence by 4%. Yet there is no evidence that there has been any positive change since the last time this was promised by Gordhan.
According to the Budget Review, national and provincial expenditure has grown exponentially. Most public sector workers were in the top 30% of wage earners yet their demands are high. One example of how out of control personnel spending is, was a f igure in the Budget Review showing that between 2007/08 and 2010/11, local government personnel spending increased by a staggering 60%.
A def i c i t of 3.9 % of GDP