Old Mutual: Manuel could spend R25bn

Looking at the options available to Finance Minister Trevor Manuel when he delivers his national budget in the National Assembly on Wednesday, the experts of the Old Mutual Investment Group reckon that he could have as much as R25-billion to play with.

Johan Els, a senior economist, reckons that the revenue take will overshoot by as much as R4,1-billion and that another R3-billion would come from “normal” tax increases — excise, fuel levies and so forth. The Treasury is targeting a budget surplus of about R16-billion, and if these sums were added together, a total of R23-billion would enable an exactly balanced budget to be reached.

A deficit of, say, R2-billion would bring that total to R25-billion, and would not scare investors.

But how would he spend it?

Old Mutual believes that there should be no further increases in personal tax relief — except for enough to account for fiscal drag caused by inflation. However, it is firmly of the opinion that there must be a cut in company tax.


Abri Meiring, business environment manager for Old Mutual, said on Tuesday that the current company tax rate of 29% should be brought down by 1% to 28%, and that it should be progressively decreased until it reaches 25%.

He expects much of the available revenue to go on social spending. Already announced by the president and the social development minister have been the equalisation of pension age for men and women, and an increased payment of the child grant to include children above 14.

Old Mutual’s team believes that further announcements will be made on the industrial-policy action plan and the 24 “apex priorities”.

The team also believes that the electricity crisis will form an important part of the minister’s speech. The recapitalisation of Eskom facing a huge infrastructure spend will most likely be done, according to Els, through a combination of cash, loans and debt guarantees.

Els suggested that the cash element would likely be classified as an “extraordinary payment” that would not affect the budget balance, though it would affect funding.

Also expected are more details on the new social security system; and while the so-called Harvard group of presidential advisers have proposed that all exchange controls be lifted, this is not likely to happen. — I-Net Bridge

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