Budget bearers: Finance minister Pravin Gordhan
Finance minister Pravin Gordhan made it very clear in his 2017 budget speech, delivered this Wednesday, that tough choices have to be made to achieve the government’s desired developmental outcomes. This underlines some of the reasoning behind the announcement of increases in wealth and sin taxes and the implementation of the sugar tax.
“Economic growth is slow, unemployment is far too high and many businesses and families are under stress,” said Gordhan.
“We face an uncertain and complex global environment and at the same time we face immense transformation challenges. We must overcome the inequalities and divisions of our society. All South Africans must share in a more prosperous future.
“We have a plan for a more inclusive, shared economy. Its implementation requires greater urgency and effective collaboration among all social stakeholders. Change is difficult, and often contested. In these tough times we draw strength from the resilience and the diverse capabilities of our people, our business sector, our unions and our social formations.
“In our communities, there are strong bonds and powerful traditions of caring. These are wonderful social assets, and I believe that all of us can commit to doing more to make the lives of fellow South Africans better. Obstacles, there will be many. Overcome them. Detractors abound. Disprove them.
Negativity inspired by greed and selfishness will obstruct us. Defeat the bearers of this toxic ethic.
“South Africans, wherever you are, own this process, defend your gains, demand accountability and be an active agent for change.”
Cold facts
The key features of the framework for the 2017 budget include that expenditure is within the envelope projected in last year’s budget, according to Gordhan.
“While global growth is slightly better, geopolitical and economic uncertainties have increased,” he said. “Our low growth trajectory provides a major challenge for government and citizens. We need to radically transform our economy so that we have a more diversified economy, with more jobs and inclusivity in ownership and participation.
“Our financial situation is difficult, but we have still produced a credible budget. We need to prioritise our spending better, implement our plans more effectively and make a greater impact.
“We need to build the widest possible partnership to promote consensus and action on a programme for inclusive growth and transformation.
“Our state-owned companies and finance institutions play a substantial role in infrastructure investment and financing development. Their borrowing requirements are taken into account in the overall fiscal framework.
“An additional R28-billion will be raised in taxes and the budget deficit for 2017/18 will be 3.1% of GDP, in line with our fiscal consolidation commitment,” he said.
“Government debt, which is presently over 50%, will stabilise at about 48% of GDP over the next three years and redistribution in support of education, health services and municipal functions in rural areas remains the central thrust of our spending programmes.”
The 2017 budget has allocated funds to support economic growth, including R3.9-billion for small, medium and micro enterprises and cooperatives, R4.2-billion for industrial infrastructure in special economic zones and industrial parks, R1.9 billion for broadband implementation and R3.9-billion for the Council for Scientific and Industrial Research.
There is also an additional R494-million for tourism promotion and R266-million to support the aquaculture sector and realise the goals of Operation Phakisa. There is spending on agriculture, rural development and land reform amounting to nearly R30-billion by 2019/20.
“Effective implementation of these and other programmes and initiatives will set us on a higher growth trajectory than currently projected,” said Gordhan. Progress in engagements between government, the business sector and social stakeholders is imperative.”
The budget at a glance
The marginal tax rate will be increased to 45% for earners over R1.5-million per annum.
The dividend withholding tax will be raised from 15% to 20%.
The general fuel levy is to increase by 30 cents per litre and nine cents per litre for the Road Accident Fund.
The increases in excise duties for alcohol and tobacco will be between 6% and 10%.
There has been a small change to medical tax credits.
Tax-free savings account allowance has increased from R30 000 to R33 000 per year.
The transfer duty threshold for residential property will increase from R750 000 to R900 000 from March 1 2017.
Foreign employment income exemption is only available if earnings are liable to be taxed in the foreign country.
The proposed expenditure for 2017/18 totals R1.56-trillion, with interest on debt amounting to R169-billion. Projected revenues amount to R1.41-trillion and the balance of R149-billion or 3.1% of GDP will be borrowed
Government debt now stands at R2.2 trillion, or 50.7% of GDP.