The revamp of the public sector is a major thrust of government’s commitment to delivery, reports Madeleine Wackernagel
The 10,4% increase in total expenditure is higher than expected, mainly owing to the R6- billion allotted to improvement of conditions of service. The process of restructuring the public service is expensive in the first year, says Finance Minister Chris Liebenberg, but the benefits of a more efficient civil service will quickly outweigh the costs.
The process involves downsizing and rightsizing: flattening the gradings, ironing out inequities and paying market-related salaries to encourage skilled workers to stay in the public service. No figure was put on the total number of redundancies envisaged; despite the burgeoning unemployment problem, the measure was generally welcomed.
Liebenberg stressed a commitment to delivery; revamping the public service is a huge part of that initiative, as is the new South African Revenue Service (SARS), to go on line next month.
The issue of roll-overs was highlighted as part of the new efficiency drive. Housing, while allotted a lower amount than last year, will come out with R4,6-billion, owing to the backlog of unspent monies in the Reconstruction and Development Programme Fund and National Housing Fund.
Education scores with R5,5-billion against R4,3-billion last year. Substantial increases in subsidies to universities and technikons are envisaged, as is a R300-million fund to assist financially disadvantaged students.
Defence spending, while down from 4,5% of Gross Domestic Product to less than 2% this year, is still high at R10,2-billion. Scaling down the defence force is never easy; the defence lobby is a powerful one, says one analyst.
On balance there were few surprises in the expenditure plans, or indeed, in the taxation changes. While the levy on pension funds was expected, other revenue-generating measures amounted merely to tinkering. Excise taxes could have been higher, says the health lobby, while the increase in estate duty and donations tax to 25% was seen as a first step to a capital transfer tax.
‘Clearly the government has broadly accepted [Michael] Katz’s views on capital transfer tax and a threefold increase in this area of taxation can be expected in the fullness of time. In addition to the rate hike, action on the treatment of interest-free loans in estate planning and restriction on generation- skipping devices can be expected in the capital transfer tax act when it arrives, probably in 1997,” said Tenk Loubser of Price Waterhouse.
The lowering of the secondary tax on companies and the marketable securities tax was welcomed. The South African Chamber of Business pointed out, however, that company taxes are still very high relative to our competitors, and called for their abolition.
If there was one criticism of the Budget, from business to labour, it was the lack of boldness. Sacob said that while it took some fiscal steps in the right direction, it did not meet the economic challenges that lie ahead. “Some tough decisions that are needed to improve South Africa’s economic performance have not been taken.”