A weaker business confidence coinciding with a severe drought have been blamed for the deterioration of the South African economy as the country faces a R48 billion tax increase over the next three years.
In his budget speech on Wednesday, South African Minister of Finance, Pravin Gordhan, says the budget deficit will be reduced to 2.4 per cent by 2018/19.
“Tax increases amounting to R18 billion in 2016/17 are proposed and a further R15 billion a year in 2017/18 and 2018/19,” says Gordhan.
Addressing a media briefing just before the budget speech, Gordhan stated that he “has not yet given to the temptation to tax millionaires a little bit more.”
[Read S.A Finance Minister Pravin Gordhan's 2016 Budget Speech here:
In the budget speech, Gordhan also proposed expenditure cuts of R25 billion over the next three years, mainly by curtailing personnel spending.
The finance minister indicated the phasing out of “no longer” needed state-owned entities, but it seems the controversial South African airline service, SAA, will not be one of them.
“We do not need to be invested in four airline businesses. Minister Brown and I have agreed to explore the possible merger of SAA and SA Express, under a strengthened board, with a view to engaging with a potential minority equity partner, and to create a bigger and more operationally efficient airline,” says Gordhan.
This may not go well with many, including the head of the Economics and Business Sciences School at the University of the Witwatersrand, Jannie Rossouw, who is very vocal about the privatisation of “useless” state-owned businesses including SAA.
Gordhan also proposed an allocation of an additional R16 billion to Higher Education and R11.5 billion to social grants over the next three years.
BELOW ARE SOME OF THE PROPOSALS MADE BY THE FINANCE MINISTER IN HIS BUDGET SPEECH:
- Against the background of slow growth, rising debt and higher interest rates, the pace of fiscal consolidation will be accelerated. The budget deficit will be reduced to 2.4 per cent by 2018/19.
- The expenditure ceiling is cut over the next three years by R25 billion, mainly by curtailing personnel spending.
- Tax increases amounting to R18 billion in 2016/17 are proposed and a further R15 billion a year in 2017/18 and 2018/19.
- An additional R16 billion is allocated to higher education over the next three years, funded through reprioritisation of expenditure plans.
- Taking into account projected increases in the cost of living, R11.5 billion is added to social grant allocations over the next three years.
- Funds have been reprioritised to respond to the impact of the drought on the farming sector and water-stressed communities.