Hailing the Grammy Award for Ladysmith Black Mambazo and the Golden Bear award for uCarmen eKhayelisha, Minister of Finance Trevor Manuel said on Wednesday in his 2005/06 Budget Speech that it is entirely fitting that the new season of hope and rising confidence of the nation should be proclaimed in music and in theatre.
“Even as we enjoy the fruits of the progress made in our first decade, we know that our work is not complete until all our people have achieved freedom from want, freedom from fear, freedom from prejudice, freedom from injustice,” Manuel said as he remembered the signing of the Freedom Charter in 1955.
“In order to complete the liberation”, Manuel has built on President Thabo Mbeki’s Programme of Action by providing more in social grants, so alleviating want.
He has also encouraged small businesses through tax incentives, while ensuring that the cost of doing business in South Africa is reduced by boosting infrastructure spending and reducing red tape.
Given the uncertain global economy, Manuel finds comfort in South Africa’s diverse trade and financial links, which reduce dependency on any one country, as well in robust domestic demand, which are “sources of strength in an uncertain world”.
That means that after four years of 3,2% real economic growth, which has boosted real per capita incomes by 15% over the past decade, he expects a minimum of 3,8% growth going forward, so that in the decade ahead, real per capita income grows by at least 30%.
In the fourth quarter of 2004, non-government services gross domestic product growth was 5,5% year-on-year, so there is good reason to believe that the 2005/06 Budget does indeed herald a “season of hope”.
Highlights from the Budget
Government revenue is set to rise by 12,2% in the 2005/06 Budget to R379-billion, from a revised R338-billion in 2004/05.
Total expenditure, excluding interest costs and a contingency reserve, rises from R363-billion in 2005/06 to R428-billion by the end of the medium-term expenditure framework period in 2007/08.
The Department of Transport is to receive allocations of R250-million in the 2004/05 financial year, and R315-million and R320-million in the following two years, “to initiate the taxi recapitalisation programme” and to support public transport services and infrastructure”.
There is no need for further relaxation in foreign-exchange controls on individuals or companies as no one has been to the Treasury to request that the limits be raised, according to Manuel.
There will be no changes in the current 18% rate of tax on retirement funds until the current reforms in the retirement industry are agreed upon.
Manuel announced a 1% reduction in the rate of corporate tax — to 29% from 30% — in line with the international trend towards reduced taxation, or increased tax exemption levels for business income.
Excise duties on tobacco products have been increased between 7,5% and 14,9%, meaning excise duty on a pack of 20 cigarettes will rise from 452,8 cents to 504,87 cents.
Excise duties on alcoholic beverages have been increased by between 9,4% and 20%.
The government has reformed the tax treatment on medical aid cover to encourage broader medical scheme coverage, extend the tax benefit to self-employed individuals and achieve more equitable tax treatment.
South Africa is to spend just more than R74,4-billion more than anticipated over the next three years with about a third of this spending going to increased social security grants.
South Africa’s transport umbrella company, Transnet, has finalised a five-year investment plan and is expected to invest R49,5-billion on infrastructure — with R30,2-billion to be spent over the next three years.
South Africa’s nine provinces receive the bulk of state funds. National departments are scheduled to get about R136-billion in 2005/06 — up from R121-billion in the past year — while provinces are set to receive about R210-billion, up from R185,3-billion.
The government plans to increase the number of police officers from 139 000 — the figure that applied in 2003 — to 165 850 by 2008.
R1-billion has been made available for a new micro agriculture finance scheme for emerging farmers and beneficiaries of land reform.
The Budget provides R6-billion for the land-restitution programme over the next three years.
The Treasury projects the South African Reserve Bank’s target inflation measure, CPIX, which is consumer inflation less mortgage rates, at an annual average of 4% this year compared with 4.3% in 2004 and 6,8% in 2003, while real economic growth is projected at 4,3% in 2005.
The power parastatal Eskom will be spending R110-billion on infrastructure, including R56-billion over three years.
Manuel has introduced a new method of calculating motor-vehicle allowances for business purposes that takes into account the residual value of the vehicle and by capping the car value at R360 000.
Manuel has announced a five cent per litre increase on the general fuel levy on petrol and diesel, to 116 cents and 100 cents per litre, respectively, effective from April 6 2005.
Manuel has unveiled reductions in personal income tax totalling R6,8-billion for the 2005/06 financial year. Manuel said the reductions willbenefit taxpayers across all income brackets.
The maximum old age, disability and care dependency grants will rise by R40 to R780 a month from April 2005.
Foster-care grants will be increased by R30 to R560 and the child-support grant goes up by R10 to R180 a month.
The government estimates it will collect about R2,4-billion in levies resulting from R65-billion in foreign assets disclosed under the government’s foreign-exchange control amnesty.
— I-Net Bridge