/ 6 February 2009

Budget should up social infrastructure spend

Next week’s 2009/10 budget should bring about an increase in spending on social infrastructure, KPMG said on Friday.

”In line with current political objectives, KPMG expects social expenditure to receive even more emphasis in the 2009/10 budget,” the audit, tax and advisory firm said.

The African National Congress (ANC) election manifesto prioritised health, education, rural development and agricultural reform, sustainable employment creation (including addressing underemployment) as well as a reduction in crime and corruption.

There would therefore be a shift away from increased infrastructure spending, towards increased spending on social infrastructure, according to KPMG.

While mention had been made of both social health insurance and a basic income grant, it was unlikely that these services would come online within this budget period, said Lullu Krugel, manager, KPMG Financial Risk Management.

According to Krugel, Eskom could not count on extra funding in the 2009/10 budget.

”Eskom received additional funding for their capital expansion project during the 2008/09 budget year, after the January 2008 electricity crisis.

”With the demand for electricity having declined, due to slower economic growth, it is not expected that Eskom will receive extra funding in the 2009/10 budget,” she said.

Infrastructure expenditure was not expected to increase significantly, Krugel said, as R11-billion was allocated to the public transport infrastructure systems in the previous budget for improvements in infrastructure over the next three years.

This included investment expenditure on upgrading infrastructure in order to successfully host the 2010 Fifa Soccer World Cup, she said.

Turning to taxes, Krugel said it was unlikely that there would be any material reductions in personal income tax.

”Tax brackets for lower income groups are expected to be adjusted upwards to compensate for inflationary changes.”

She said no major changes were expected with regard to company tax.

However, in keeping with past trends, sin taxes and the fuel levy were expected to increase.

Turning to exchange control, Krugel said government had committed itself to the relaxation of exchange control measures.

”Expectations are that they will continue the historical trend, but lessons learned during the past couple of months might result in them approaching this with caution, with only minimal changes being made, as global financial market instability persists.” — Sapa