Opinion divided on specifics

CERTAIN conditions peculiar to South Africa contributed to high banking fees, the Banking Association of SA said in response to criticism of banks in yesterday’s Budget.

Finance Minister Pravin Gordhan said that fees for many products in the financial sector remained too high.

“We note the minister’s comments on the financial sector,” the association said.

“However, we must point out certain cost factors peculiar to South Africa that contribute to such costs. Examples are broadband costs, costs of protecting cash and significant compliance costs.”

The association said increasing competition was leading to a more efficient sector with lower costs.

Gordhan’s measures to encourage savings were welcomed. “We welcome the initiatives towards tax-exempt savings products and commit the financial sector to working with government to give effect to this.”

The association said the government should work with the private sector in developing the economic infrastructure, to which R845 billion had been committed. “We urge government to create the opportunities for private sector participation in these projects through sound PPPS (public-private partnerships) and other mechanisms.”

The Banking Association of SA represents all registered banks in South Africa.

There was nothing in Finance Minister Pravin Gordhan’s Budget speech for farmers to get excited about, agricultural union TAU SA said yesterday.

The increased fuel tax of 28c a litre would mean farmers would cross-subsidise projects unrelated to farming through fuelling their equipment, such as tractors and harvesters, which “are never even seen on a public road”, the union’s president, Louis Meintjies, said. Taxis were exempt from paying the Gauteng tolls, to be introduced in April, while farmers were expected to pay full price.

This meant it would cost farmers more to transport their goods to markets. Even though alternative routes were expected to be restored, Meintjies said this would take a long time. “Agriculture has thus essentially nothing to be excited about from the budget.”

The increase in capital gains tax for companies to 66 percent would be “disastrous” for farmers as most were structured as companies.

“If the pressure continues on farmers to sell their land in terms of land reform, they then have a tremendous amount of capital gains tax to pay.”

Meintjies said this would make it “impossible” for them to buy new land.

Although R1.9 billion was set aside for the Agriculture Department and the Land Bank, very little of this would benefit commercial farmers as the majority would go to emergent farmers, he said.

Mike Peo, the head of infrastructure, energy and telecommunications at Nedbank Capital, said this year’s Budget seemed to be the first to address not just allocation but spending on infrastructure. He said there was much stronger commitment to making sure infrastructure allocation did not remain on books but was utilised where it should. “It’s a very positive Budget and I think the million-dollar trick is that it gives concrete views on how budget will be spent and how some of the things outlined in the planning report will be carried out,” he said.

Medscheme chief executive André Meyer: “We are pleased that the minister has given more practical steps on how this plan is going to be rolled out over the next 14 years and some clarity on how this is going to be funded going forward.

“We are particularly pleased that the first five years in the plan’s roll-out are going to focus on strengthening the public health sector infrastructure and the training of more professionals.

“We believe the government is taking the right direction in this regard because these are very crucial factors in the ultimate success of the National Health Insurance (NHI).”

He said with the NHI there would still be benefits for medical aid schemes, provided there was a better relationship between public and private health systems.

The scheme offered commercial opportunities and the public sector should take advantage of the private sector’s robust information technology management systems, and experience in managing costs.

An increase in the cost of tobacco products fell within “reasonable levels”, British American Tobacco South Africa said shortly after Finance Minister Pravin Gordhan tabled the Budget.

“For us this is an acknowledgement by government of the significant problem of the illegal trade in cigarettes,” spokeswoman Leslie Rance said. “This is also to blame for the approximately R4bn loss in government revenue due to evasion of taxes on illegal cigarettes.”

Rance said about 28 percent of cigarettes sold were illegal.

The Tobacco Institute of Southern Africa voiced similar sentiments and commended Gordhan for maintaining a stable rate on tobacco products.

“Although the excise was increased by 58c per packet of 20 cigarettes, it was done to maintain the 52 percent tax incidence on tobacco products in line with current government policy,” the institute’s chief executive, Francois van der Merwe, said.

Christelle Grohmann, director of Grant Thornton Advisory Services, said: “We agree with the minister where he emphasises that business should invest in our future – he alluded to 43 planned public infrastructure projects, of which transportation and logistics, social infrastructure and energy were the main focus areas. Yet he provided no clarity or role for the private sector or on PPPS in general.”

Cliff Watson, executive tax manager, Grant Thornton, said: “It is encouraging that there is some tax relief given to small, micro and medium enterprises. The reduction in the administrative burden is also welcomed.”

The South African middle class were the biggest losers in this year’s Budget, trade union Solidarity said yesterday.

“A sizeable increase in the fuel levy, ostensible relief from personal income tax and the implementation of the controversial tolling system on Gauteng highways make the… middle class the biggest losers,” Solidarity researcher Piet le Roux said in a statement.

“The middle class will have to cut back in other areas when products and services become more expensive due to the increases.”

The union was concerned about the country becoming a welfare state.

“While Minister Gordhan held that global economic problems were related to unregulated capitalism… (Solidarity is) concerned that he was losing sight of the crisis of the growing welfare state that was created by the government and is financed by taxpayers,” Le Roux said.