By: Monique Vanek
In a press conference with media ahead of the release of the Medium Term Budget Policy framework, South Africa’s Finance Minister Malusi Gigaba said it aimed to be as candid as possible about the dire situation South Africa finds itself in. Below are the highlights.
<div id="attachment_122717" style="width: 693px" class="wp-caption aligncenter"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-122717" class="wp-image-122717 size-full" src="http://cnbc.africa/wp-content/uploads/2017/05/Gigaba2_Flickr-e1495621373543.jpg" alt="" width="683" height="496" />Photo: Flickr.</div>
Economic outlook is dire
<ul>
<li>2017 Economic growth revised downwards from 1.3% to 0.7%.</li>
<li>Growth expected to reach 1.9% in 2020.</li>
<li>GDP per capita has declined for two consecutive years.</li>
<li>95% of our wealth is in the hands of 10% of the population.</li>
<li>SA has twin challenge of growing economy &amp; ensuring inclusiveness.</li>
<li>SA’s expenditure ceiling could be breached by R3.9bn this year, mainly as a result of government’s recapitalisation of South African Airways and the South African Post Office. Government is considering the disposal of assets to offset this.</li>
<li>In 2016, gross fixed capital investment declined by 3.9%, with large decreases in mining and manufacturing.</li>
<li>Capital investment is expected to decline by 0.6% in the current year.</li>
<li>Government debt held by non-residents has risen from 4.4% of GDP in 2007 to 17.6% of GDP in 2017. A sharply negative shift in global investor sentiment towards South Africa could result in large capital outflows, with highly destabilising consequences for the economy.</li>
<li>Per capita income expected to continue to stagnate in the years ahead</li>
<li>The consolidated budget deficit will widen to 4.3% of GDP in 2017/18, against a 2017 Budget target of 3.1 per cent of GDP.</li>
<li>Gross national debt is projected to reach over 60% of GDP by 2022, with debt service costs reaching 15% of main budget revenue by 2020/21.</li>
<li>Aims to kick-start inclusive growth by implementing the 14 measures announced by Gigaba in June.</li>
<li>A presidential task team is considering a range of steps to bring the public finances back onto a sustainable path.</li>
<li>Growth must be characterised by radical economic transformation.</li>
</ul>
Asset registry to be created
<ul>
<li>Government plans to have a full asset registry available by March 2018 of non- and core assets that it can disposed of to ensure it does not breach its expenditure ceiling</li>
<li>Government is still considering whether to sell its stake in Telkom</li>
</ul>
Tax revenue shortfall 
<ul>
<li>Gross tax revenue for the 2017/18 – 2019/20 period is projected to fall short of the 2017 Budget estimates by R209 billion.</li>
<li>Tax revenue projected to fall short of the 2017 Budget estimate by R50.8 billion in the current year</li>
</ul>
Tax changes
<ul>
<li>Cabinet has approved the release of the carbon tax bill to Parliament</li>
<li>Treasury to relook at medical tax credits</li>
</ul>
Tax revenue and administration
<ul>
<li>Government is noting slippage in tax compliance</li>
<li>SARS working with FIC &amp; SARB to close tax gaps</li>
<li>SARS, FIC &amp; SARB’s ability to combat cyber-crime must be enhanced</li>
<li>Treasury engaging with SARS on Tax Ombud recommendations relating to tax refunds.</li>
</ul>
Spending priorities 
<ul>
<li>The public sector will spend more than R300 billion each year on infrastructure, with about half of this funded directly from the budget.</li>
<li>Lion’s share of economic infrastructure will be provided by State Owned Companies;</li>
<li>Municipalities spending is projected to be R197bn</li>
<li>Provinces are anticipated to spend R208bn over 3yrs</li>
<li>Education sector expected to spend R44bn</li>
<li>Cabinet approved Budget Facility for Infrastructure</li>
<li>Department of Planning, Monitoring &amp; Evaluation has prepared a mandate paper</li>
<li>Government will protect spending on core social programmes that benefit poor</li>
<li>Over next 3yrs consolidated spending will increase by 7.3% to R1.9trn in 2020/21</li>
<li>Community development, learning, culture &amp; health are the fastest-growing functions</li>
<li>No academic deserving student must be excluded due to financial constraints; more in budget 2018</li>
</ul>
 
Stabilising and revitalising state-owned companies
<ul>
<li>The trend of SOCs seeking bailouts to finance operational expenditure, inefficiency and waste must end</li>
<li>Proposals to be made to make Govt guarantee framework more stringent</li>
<li>Retaining a national carrier is in the public interest</li>
<li>A strategic partner is still on the agenda for SAA</li>
<li>Eskom’s governance issues are a major concern</li>
<li>National Treasury to work with DPE to strengthen governance at Eskom</li>
<li>New board for Eskom before the end of November</li>
</ul>
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&nbsp;

SA’s Medium-term budget highlights

By: Aviwe Mtila
Job creation, which has escalated to an alarming all-time high of 27 per cent, and small business development top the list of South Africa’s spending priorities.
<img loading="lazy" decoding="async" class="wp-image-10289 size-full" src="http://cnbc.africa/wp-content/uploads/2017/01/employment.jpg" alt="Job creation is driven by demand" width="1310" height="873" />
This is contained in the Medium Term Budget Policy Statement (MTBPS), delivered by the country’s Finance Minister, Malusi Gigaba, in Cape Town this afternoon.</div>
The MTBPS states that Cabinet approved a Mandate Paper in August to guide the spending choices of national government. It further states that this was done to strengthen alignment of the national budget, the medium-term strategic framework and the National Development Plan (NDP) during the remaining term of the current administration.
The proposed seven expenditure priorities are as follows:
<ul>
<li>Job creation and small business development</li>
<li>Youth development</li>
<li>Infrastructure expansion and maintenance</li>
<li>Land reform, smallholder farmer and agriculture development</li>
<li>Comprehensive social security, education and skills</li>
<li>An integrated plan to fight crime</li>
<li>Advancing the national interest in the Southern African Development Community, throughout Africa, and through participation in the BRICS (Brazil, Russia, India, China and South Africa) bloc and the Indian Ocean Rim Association.</li>
</ul>

SA’s 27% unemployment tops spending priorities-MTBPS

By: Aviwe Mtila
South Africa is unlikely to achieve its National Development Plan goals and some programmes may have to be cut to meet unanticipated spending pressures.
<img loading="lazy" decoding="async" class="aligncenter wp-image-41719 size-full" src="http://cnbc.africa/wp-content/uploads/2017/02/cape_town_-_pixabay.jpg" alt="Britain warns of possible terrorist attacks in South Africa" width="960" height="633" />
This is contained in the Medium Term Budget Policy Statement (MTBPS), delivered by the country’s Finance Minister, Malusi Gigaba, in Cape Town this afternoon.
The National Development Plan (NDP) was developed five years ago and culminated in a long term vision for South Africa, Vision 2030, which spelled out what was required to realize the country’s aspirations.
Among other goals, the NDP set out to grow the economy by 5.4 per cent yearly, and bring unemployment down to 6 per cent by 2030. At present, South Africa’s unemployment rate sits at 27 per cent.
The Finance Minister spearheaded his MTBPS by passionately giving a background on the NDP. Interestingly the actual MTBPS, seen by journalists’ hours before the minister’s speech, raises concerns about the NDP not being achieve because of the country’s current economic trends.
“It was absolutely critical for Vision 2030, which spelled out what was required to realize our aspirations for our society, and for all who live in it. That is what government is about, and that is what development is also about – putting in place the conditions for the people to realize their aspirations for themselves,” says Gigaba.
The MTBPS also notes that there will be no additional funds available to increase baseline expenditure over the 2018 Budge
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As the country’s economic outlook takes a turn for the worst, with the GDP contracting by 0.7 in the first quarter of 2017, a stronger economic growth is required to return the public finances to a sustainable position. This will put South Africa back on a path of rising employment and increasing prosperity states the MTBPS.

SA Government could lose sight of Vision 2030

By: Aviwe Mtila
Achieving inclusive growth and transforming South Africa’s economy remains at the core of the country’s government.Achieving inclusive growth and transforming South Africa’s economy remains at the core of the country’s government.
<div id="attachment_120542" style="width: 770px" class="wp-caption aligncenter"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-120542" class="wp-image-120542 size-full" src="http://cnbc.africa/wp-content/uploads/2017/04/Gigaba-GovernmentZA.jpg" alt="" width="760" height="522" />Photo: GovernmentZa</div>
This was the message from South Africa’s Finance Minister, Malusi Gigaba, as he tabled his first Medium Term Budget Policy Statement in parliament this afternoon.
“Millions of South Africans are living in poverty. Unemployment is 27.7 per cent, the highest level since September 2003, and is mostly felt by our youth, and the wealth remains highly concentrated. 95 per cent of our wealth is in the hands of 10 per cent of the population,” says Gigaba.
&nbsp;
In his speech, Gigaba noted a number of challenges that led to the exclusion of South Africa’s majority:
<ul>
<li>Direct black ownership and management of the economy remains low.</li>
<li>Employment equity remains a challenge with progress for black people and women participating at top and senior management levels have apparent stalled</li>
<li>A high degree of market concentration, with low competition and high barriers to entry. In several sectors, a handful of companies dominate, controlling more than 80-90% of the market. Prospective market entrants find it extremely difficult to break in, as dominant companies enjoy seemingly insurmountable advantages.</li>
<li>Historically segregated and entrenched spatial planning affect travel costs as well as job search and effectively disadvantage many individuals from equal participation in the economy.</li>
</ul>
The minister once again called for radical economic transformation, quoting President Jacob Zuma. 
“Our next phase of growth must be characterized by radical economic transformation roadly defined by President Zuma in this year’s state of the Nation address as ‘fundamental changes to the structures, systems, institutions and patterns of ownership, management and control of the economy, in favour of all South Africans, especially the poor, the majority of whom are African and female,” says Gigaba. 
Concerns have been raised by the public and some politicians on the legitimacy of this call for radical economic transformation. This policy was adopted by the ruling African National Congress (ANC) in its elective conference, which took place in Mangaung, in 2012. 
Many are questioning the timing of President Zuma’s heightened call for transformation when he has just over a year at the helm of South Africa, and a few months as the ANC leader. 
The Finance Minister went on to call for the engineering of a new growth and transformation model.
<ul>
<li>We desperately need government to effectively play its role as an enabler for and an active participant in growth and transformation.</li>
<li>We desperately need business that invests, thereby creating growth and employment.</li>
<li>We need labour that is productive, and ever growing its capabilities.</li>
<li>We need a society that aids progress through constructive dialogue, active citizenship and social tolerance.</li>
</ul>
The COE’s Initiative was highly commended by Finance Minister Gigaba for advancing efforts on the Youth Employment Services (YES) initiative that aims to bring over a million young South Africans to internships over the next three years. 
Gigaba also commended YES for setting up a R1.5 billion Small and Medium-sized Enterprise (SME) fund which he says will soon be operational.

Radical Economic Transformation remains the next phase of SA’s growth-MTBPS

By: Aviwe Mtila
Job creation, which has escalated to an alarming high of 27.7 per cent, and small business development top the list of South Africa’s spending priorities. Over 30 million South Africans live on less than R1 000 per month.
<img loading="lazy" decoding="async" class="aligncenter wp-image-21569 size-full" src="http://cnbc.africa/wp-content/uploads/2017/01/welding__manufacturing.jpg" alt="Manufacturing key to alleviating unemployment" width="525" height="350" />
This is contained in the Medium Term Budget Policy Statement (MTBPS), delivered by the country’s Finance Minister, Malusi Gigaba, in Cape Town this afternoon. 
“Creating jobs and dramatically rolling back the tide of unemployment remains our most urgent priority,” says Gigaba. 
The MTBPS states that Cabinet approved a Mandate Paper in August to guide the spending choices of national government. It further states that this was done to strengthen alignment of the national budget, the medium-term strategic framework and the National Development Plan (NDP) during the remaining term of the current administration. 
The proposed seven expenditure priorities are as follows:
<img loading="lazy" decoding="async" class="aligncenter wp-image-288413 size-full" src="http://cnbc.africa/wp-content/uploads/2017/10/Aviwe_01.png" alt="" width="756" height="669" />
The MTBPS goes on to state that over the next three years, consolidated expenditure will grow by an annual average of 7.3 per cent, from R1.6 trillion in 2017/18 to R1.9 trillion in 2020/21. This is mainly attributed to Community Development, Learning and Culture, and Health. 
The fastest-growing category of expenditure is debt-service costs, which grows by 11 per cent, says the MTBPS.
<img loading="lazy" decoding="async" class="aligncenter wp-image-288415 size-full" src="http://cnbc.africa/wp-content/uploads/2017/10/Aviwe_02.png" alt="" width="540" height="411" />
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More than 30 million S.Ans live on less than R1000-MTBPS

James Turp | ABSA Asset Management
Finance Minister Malusi Gigaba’s Medium Term Budget Policy Statement (MTBPS) on October 25th will come under intense scrutiny as it is the first opportunity for the Minister to demonstrate his performance in the position.
<img loading="lazy" decoding="async" class="aligncenter wp-image-119380 size-full" src="http://cnbc.africa/wp-content/uploads/2017/04/Gigaba_Flickr.jpg" alt="" width="1024" height="720" />
Historically, the MTBPS has been seen as a useful scorecard for progress made on the February budget. It provides detail on government’s spending priorities, sets out fiscal objectives over the medium term (three years) and sketches government’s take on the South African economic context.
Having recently emerged from a technical recession and with real economic growth projected at 0.6% for 2017 following from the mere 0.3% in 2016, the country is growing way below its potential and conspicuously in contrast to global growth trends.
Many observers will be looking out for the degree of its consistency with the February budget, tabled by former Finance Minister Pravin Gordhan, and whether any introduced measures are ratings agency and investor friendly, as well as what progress has been made on inclusive growth deadlines.
As fixed income investors in South African Government debt, we will naturally be observing the important fiscal metrics that indicate the health of the fiscus &#8211; which are expected to have slipped significantly since February; at the worst rate since the 2009 global financial crisis.
In a large part, 2009’s slippage was related to the global situation but 2017 is in contrast as negative global output gaps are generally closing. South Africa is an obvious exception to this trend.
In trying to explain why South Africa is missing out on the global recovery, the South African Reserve Bank, in its October 2017 Monetary Policy Review, attributes this to two main factors: lower commodity prices (largely outside government’s ability to influence) and subdued consumer confidence (a proxy for general confidence and a factor that is influenced by government policies and behaviour).
Their analysis indicates that subdued confidence levels alone removed 115 basis points from GDP growth in 2016 (i.e.0.3% realised instead of 1.45%).
It follows that actions taken to influence confidence are critical to address this low growth paralysis. As a result, the MTBPS becomes a far more interesting and powerful event which could provide a much needed boost to confidence levels, and positively influence investor, business and consumer behaviour via discretionary spending and also labour and capital productivity.
Minister Gigaba should use the opportunity to announce actions that to improve confidence, to address this low growth paralysis and positively influence investor, business and consumer behaviour.
Focus will be on the size of the revenue shortfall, forecast to be anywhere between R25 to R50 billion, having widened due to the lower realised economic growth, apparent revenue collection inefficiencies, lower tax buoyancy and disappointing receipts from the international tax amnesty.
The delicate act of raising revenue against this backdrop of a struggling domestic economy will be difficult. It is thought that an extra R25 billion of revenue could be required.
Higher personal income tax rates or customs duties could undermine economic growth. As a result, it is possible that the lens will turn to medical aid tax credits, VAT zero ratings, petrol and municipal rates.
According to the February Budget, debt/GDP was expected to peak at 52.9% at the end of 2018/19 budget year. This now seems unlikely given the much eroded fiscal space that has various consequences.
The figures show that South African government debt levels are already in line with non-investment grade countries (BB). Although South Africa’s high proportion of domestic currency debt has its benefits, when contingent liabilities and State Owned Entity (SOE) debt are included these levels approach 75% of GDP as seen below (Figure 1).
<div id="attachment_288156" style="width: 552px" class="wp-caption aligncenter"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-288156" class="wp-image-288156 size-full" src="http://cnbc.africa/wp-content/uploads/2017/10/ABSA-MTBPS_Graph-1.png" alt="" width="542" height="310" />Figure 1: Debt ratios: sovereign credit rating comparison (sources National Treasury and S&amp;P Global ratings).</div>
The funding cost of government debt needs to be lower than nominal GDP growth to assist in reducing the debt burden. The term structure of National Treasury’s issuance is expensive as they attempt to secure long term debt on a steep yield curve.
One could argue that taking bold steps and rolling funding along the shorter area of the yield curve could be more prudent even if less comfortable for the issuer.
Possibly the biggest issue at present is the source of funding for SOEs going forward.
With economic growth negatively impacted, in particular by the severe low levels of confidence, what remedies are immediately available to provide the much needed shot in the arm?
Though implementation of policy is complex, the mere signal of intent would be enough to raise confidence levels quickly. Suggestions of a 1% VAT increase, which could add as much as R20 billion to the revenue, would arguably do more and benefit the economy over the longer term as a consumption tax.
Diversifying trade agreements and strategies away from commodity dependent trading partners where possible could be considered. The elephant in the room, however, remains the severe loss making SOEs which could be aggressively addressed in steps such as the outright liquidation of the national airline or the selective sale of Eskom’s generation and distribution assets &#8211; though it is unlikely that these are available options.
This MTBPS will be closely monitored by ratings agencies, international investors and domestic businesses/entrepreneurs as well as the general public.
Ultimately, the entire country suffers as a result of South Africa’s weak growth trap, and this could be the perfect opportunity to signal a decisive turnaround in strategy.

SA’s 2017 MTBPS: A fixed income perspective

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Investors will be looking to the Finance Minister Malusi Gigaba&#8217;s Medium Term Budget Policy Statement tomorrow to provide more certainty about government&#8217;s commitment to fiscal consolidation, growing the economy and reforming State-owned enterprises.

Guidance for Gigaba

South Africa’s Finance Minister Malusi Gigaba faces a credibility test on Wednesday when he delivers his inaugural budget speech to outline spending plans and economic growth forecasts, which will provide an insight into his fiscal stance.
<div id="attachment_120542" style="width: 770px" class="wp-caption aligncenter"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-120542" class="wp-image-120542 size-full" src="http://cnbc.africa/wp-content/uploads/2017/04/Gigaba-GovernmentZA.jpg" alt="" width="760" height="522" />Photo: GovernmentZa</div>
Gigaba’s medium-term budget policy statement (MTBPS) will be made amid sluggish economic growth and a politically charged environment following allegations of corruption and influence-peddling in government, which have unnerved investors.
Rating firms are concerned about political jostling ahead of the African National Congress (ANC) conference in December to elect a new party leader to succeed President Jacob Zuma, who has battled several scandals including corruption allegations.
Whoever the ANC picks is likely to take over from Zuma as South Africa’s leader in 2019 when a national election is held.
Gigaba, who has held other key ministerial posts including home affairs and seems to be favoured by Zuma, was appointed to lead the Treasury in March, replacing the fiscally-prudent Pravin Gordhan.
Economists expect him to address concerns over low revenues when he announces spending priorities for the next three years.
A Reuters poll found poor tax receipts could push the 2017/18 budget deficit forecast to 3.9 percent of GDP from an estimate of 3.1 percent in February.
“After the cabinet reshuffle in March, 25 October will be the first major outing for Finance Minister Gigaba and will remove much uncertainty surrounding his fiscal world view,” Nomura analyst Peter Attard Montalto said.
“We do not envisage a blow out in the budget, but credibility will likely be tested if ‘anonymous’ revenue hikes are leaned on too much and growth forecasts are over-egged.”
Following his appointment, Gigaba got a sceptical welcome on financial markets on fears that budget discipline would falter. Rating agencies downgraded South African debt.
BNP Paribas South Africa economist Jeff Schultz said Gigaba “will have his work cut out” to present a credible budget.
“Ratings agencies have already made clear their stance that the future of the investment-grade rating on the country’s local-currency sovereign debt rests on Mr Gigaba’s ability to stick broadly to the status quo set by his predecessor at the time of February’s budget,” Schultz said.
South Africa emerged from a recession in the second quarter but growth remains weak, with the central bank projecting 2017 GDP growth of 0.6 percent.
<h3>CONTINGENT LIABILITIES</h3>
Fitch and S&amp;P Global Ratings rate South African foreign-currency debt in sub-investment, or “junk”, territory. But only Fitch has the country’s local-currency debt in junk.
Moody’s rates both the foreign and local currency debt a notch above speculative grade.
S&amp;P and Moody’s are scheduled to review South Africa in November. Fitch has not published its review calendar for South Africa.
Focus will also be on how Gigaba plans to bolster financial support to struggling state-owned companies such as South African Airways (SAA), which have been highlighted by the rating agencies as one of the problems facing the economy.
Last month the Treasury provided SAA with a second bailout for the year, drawing criticism from the opposition parties.
<div class="Attribution_attribution_o4ojT" data-reactid="61">
Editing by James Macharia and Richard Balmforth
</div>

South Africa’s Gigaba faces credibility test in maiden budget speech

There’s a great deal hanging on South Africa’s 2017 medium term budget policy <a href="http://www.treasury.gov.za/comm_media/press/2017/2017091801%20Media%20Advisory%20MTBPS%202017.pdf">statement</a>. Three factors are at play: there is political turmoil around the governing African National Congress, the country’s economy is performing poorly and this is the first budgetary statement from the new Finance Minister Malusi Gigaba. The Conversation Africa’s Sibonelo Radebe asked Jannie Rossouw to layout his expectations.
What keeps you up at night in relation to this medium term budget?
The single most worrying factor is the lack of economic growth South Africa faces. Growth has <a href="https://tradingeconomics.com/south-africa/gdp-growth-annual">slowed down</a> significantly in recent years and the economy flirted with <a href="https://mg.co.za/article/2017-06-07-sas-in-a-recession-heres-what-that-means">recession</a> after shrinking during the last quarter of last year and the first quarter of this year. The economy did <a href="https://www.iol.co.za/business-report/breaking-news-south-africa-moves-out-of-recession-11086750">bounce back</a> into positive growth during the second quarter but the outlook remains unimpressive. Only 0.5% growth is expected for 2017 and less than 2% over the medium term.
Owing to this lack of growth, <a href="https://theconversation.com/the-lesser-known-and-scarier-facts-about-unemployment-in-south-africa-83055">unemployment</a> is on the increase – it now stands at a staggering 27% – while government revenue is under pressure. It also implies that the government’s burden on the economy (for instance total government debt as percentage of gross domestic product, or<a href="http://www.treasury.gov.za/documents/mtbps/2016/mtbps/MTBPS%202016%20Full%20Document.pdf">Debt/GDP ratio</a>) will increase.
Government’s debt to GDP ratio is currently <a href="http://www.treasury.gov.za/documents/mtbps/2016/mtbps/MTBPS%202016%20Full%20Document.pdf">budgeted</a> to level out around 50%. This is to be welcomed because any increase in the ratio increases the interest burden.
But if slow growth and revenue shortfalls persist, government debt will increase. The debt to GDP ratio will be on its way to 65% of GDP in the medium term.
And should the combination of low growth and growing government expenditure continue after the period of this medium term statement (2017/18 &#8211; 2020/21), the debt/GDP ratio might be on its way to 100%. This projection really stresses one of the most worrying factors that has to be addressed in this statement: Limiting the level of government debt before it reaches this level.
In other countries where this level has been exceeded, severe adjustments had to be forced on their economies. Take the <a href="https://tradingeconomics.com/ireland/government-debt-to-gdp">Irish Republic case</a>. Remuneration levels and employment numbers in the civil service had to be cut dramatically to deal with the <a href="http://cpsu.ie/the-cuts/">Irish government debt crisis</a>.
There is a new finance minister in place and he comes with shifting political dynamics. How do you rate him and what do you expect from him?
It is difficult to rate the new minster, given that he’s only been in the job since April and the fact that he has not yet tabled his first budgetary statement. The only statement against which his performance can really be assessed is the <a href="http://www.huffingtonpost.co.za/2017/07/13/governments-economic-growth-action-plan-gigabas-speech-in-f_a_23027748/">14-point plan</a> he announced in July 2017.
We’ll be watching the medium term statement for his report back on progress in implementing it.
But Gigaba comes with worrying political dynamics, including accusations that he is party to <a href="http://www.fin24.com/Opinion/connecting-the-dots-on-gigabas-state-capture-project-20171009">corruption</a>.
And its difficult to separate him from the history of bad policy options of the African National Congress which has delivered the prevailing lacklustre economic performance. The fiscal crisis facing South Africa is a direct result of these policies.
How significant is the medium term budget policy statement?
It’s very important as it provides an overview of government’s plans for expenditure and for raising revenue over the next three years. A three year view is significant because it provides insight into planned government expenditure and indicates expected tax increases that South African taxpayers have to face. It also informs decisions of the credit rating agencies about South Africa’s fiscal stability.
The statement forms the basis of the <a href="http://www.treasury.gov.za/documents/national%20budget/default.aspx">annual budget</a> of government revenue and expenditure that is tabled in Parliament in February each year.
The statement is the first formal opportunity after the tabling of the annual budget where the government reports on the actual performance of revenue raised in comparison to budgeted revenue and of actual expenditure in comparison to budgeted expenditure.
This reporting by government gives an early indication of expectations for the main budget in February. For instance, if government revenue is underperforming, the expectation is that taxes will be increased the following February. Indeed a tax increase might materialise in this medium term statement.
What in you view will be key focus areas in this medium term statement?
As South Africa’s economic growth is currently lower than the forecast used for the <a href="http://www.treasury.gov.za/documents/national%20budget/default.aspx">2017/18 fiscal year</a>, tax collection has come under pressure. A <a href="http://www.fin24.com/Economy/gigaba-faces-r50-billion-budget-shortfall-economist-20170901">revenue shortfall</a> is expected for this fiscal year. The medium term statement is when the size of the shortfall will be formally disclosed.
Given expectations of a substantial shortfall, South Africans should brace themselves for substantial tax increases in the main budget in February 2018. The fiscal crisis might even be so serious that the government might decide to divert from previous practice and announce tax increases in this medium term statement.
Like any other government in the world, it raises revenue through taxes and use this revenue to fund its expenditure. If expenditure exceeds revenue, the difference must be borrowed, which adds to the level of government debt, or expenditure must be cut.
One of the biggest budgetary headaches is the ailing state owned enterprises. What should be done?
<img loading="lazy" decoding="async" src="https://counter.theconversation.com/content/85643/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" />Government is really throwing good money after bad by using public money to bailout <a href="https://www.businesslive.co.za/bd/companies/transport-and-tourism/2017-08-23-secret-gigaba-plan-to-rescue-bankrupt-saa-exposed">ailing</a> state owned enterprises. I have said a long time ago that South African Airways should simply be <a href="https://theconversation.com/south-africa-must-free-itself-from-the-burden-of-owning-a-national-airline-64004">given away</a>. This is a much cheaper option for the taxpayer instead of never ending bailouts. The South African government should reassess its holding of state owned enterprises and close, sell or give away those that are no longer financially viable. Such action will remove a large financial burden on the South African taxpayer.
<a href="https://theconversation.com/profiles/jannie-rossouw-135800">Jannie Rossouw</a>, Head of School of Economic &amp; Business Sciences, <a href="http://theconversation.com/institutions/university-of-the-witwatersrand-894">University of the Witwatersrand</a>
This article was originally published on <a href="http://theconversation.com">The Conversation</a>. Read the <a href="https://theconversation.com/whats-at-stake-in-south-africas-new-finance-ministers-first-budget-85643">original article</a>.

This is what SA’s FinMin Gigaba needs to consider when he gives his maiden medium term budget policy statement

Loucoumane Coulibaly | ABIDJAN
Ivory Coast will trim its 2017 budget spending by around 50 billion CFA francs ($84 million), a government spokeswoman said on Wednesday, less than the 200 billion CFA francs ($335 million) of cuts announced by President Alassane Ouattara last month.
Ouattara said last month that a sharp drop in global prices for cocoa, a major export from the West African country, meant spending plans would have to be scaled back sharply.
Government spokeswoman Anne Ouloto did not immediately give an explanation for the latest budget revision.
<blockquote>&#8220;Economic growth for 2017 was revised to 8.5 percent from 8.9 percent,&#8221; she added.</blockquote>
($1 = 597.4800 CFA francs)
(Reporting by Loucoumane Coulibaly; Writing by Emma Farge; editing by John Stonestreet)

Ivory Coast trims budget, growth forecast for 2017

November 2016 marked the 25th anniversary of the death of rock star Freddie Mercury, ‘The Great Pretender.’ Back then the stigma of an AIDS death was such that not enough was made of the horror that is the slow and painful death from AIDS (even if you have all the money in the world!) Only now do we see internet documentaries on the terrible end of Freddie.
Watch them! Feel them! Know them!
<img loading="lazy" decoding="async" src="/media/19341554/aids_graph_1_27feb2017_600x310.jpg" width="600" height="310" alt="Aids Graph 1_27Feb 2017"/>﻿
South Africa’s AIDS death rate may have declined from just below 50% to 28% today. But there are still 150 000 AIDS related deaths per annum. And nearly all are the poorest of the poor.
Before the national budget the topic of ‘sugar tax’ was trending. Are we bonkers? Concentrating on raising less than R1-billion in the context of a national budget of R1,4 trillion.
Yes! We are all The Great Pretenders.
New HIV infections are still sitting at around 330 000 per annum.
<img loading="lazy" decoding="async" src="/media/19341561/aids_graph_2_27feb2017_600x256.jpg" width="600" height="256" alt="Aids Graph 2_27Feb 2017"/>﻿
With effect from the 1st of September 2016: all  HIV positive children, adolescents and adults regardless of the CD4 count will be offered ART (Anti Retroviral Treatment), prioritizing those with a CD4 of less than 350. That must be a very cold comfort to an HIV victim. They should be asking ‘how did this ever happen to me?’
And that’s not the end of the problem.
Rock star economist Thomas Pikkety tells us that a 1% real economic growth rate is OK. But goes on to qualify that with ‘so long as that’s 1% above the population growth rate. So lets graph it.
<img loading="lazy" decoding="async" src="/media/19341568/aids_graph_3_27feb2017_595x300.jpg" width="595" height="300" alt="Aids Graph 3_27Feb 2017"/>﻿
South Africa is going nowhere slowly!
On 15 February 2017 the World Bank reported on the state of the  South African Economy to parliament&#8217;s <a href="http://link.email.dynect.net/link.php?DynEngagement=true&amp;H=Kcx6DL4Dm6j8l5b8EGQG5sD79SAgq9f7Q5QkowEJ0Fx2l%2Bl%2BX2VFbW8DCwKpdCyuc5%2BOEfVv8EiLojP%2FsV1%2BmnPQMyAy%2BkvCz0Sl53G6wMTQf7muJDXs0w%3D%3D&amp;G=0&amp;R=https%3A%2F%2Fpmg.org.za%2Fcommittee%2F61%2F&amp;I=20170223062401.000001753155%40mail6-23-ewr&amp;X=MHwxMDQ2NzU4OjU4YWU3ZmZhOWRjODYyNWE4YTI4OTdhMTs%3D&amp;S=sYABwP1mxp9XqYAfwwObDMJNjS8APWWqSf-95el1bEM">Standing Committee on Appropriations</a>.
<ul>
<li>The National Development Plan (NDP) targets six percent unemployment rate by 2030. To achieve this will require 600 000 new jobs annually from 2012 to 2030. However, on average since 2012, South Africa has been able to make only 250 000 jobs annually.</li>
<li>As a consequence of population growth and youth entering the labour market, unemployment has remained very high, particularly for unskilled and semi-skilled workers, and for new entrants such as woman and the youth.</li>
</ul>
Is anybody out there listening?
Of course this now all gets caught up in a massive blame game. The primary target is JZ as SA has made no progress under his regime. Let alone all the other scandals.
But the problem is not all of JZ’s making.
Yes, South Africa’s past pre-1994 will always be with us.
But we had a chance to make great progress post-1994!
<img loading="lazy" decoding="async" src="/media/19341575/aids_graph_4_27feb2017_600x321.jpg" width="600" height="321" alt="Aids Graph 4_27Feb 2017"/>﻿
Before the financial crisis of 2008/9 South Africa was growing faster than its population and there was a real decline in national debt. We were on the right trajectory.
President Mbeki and then Finance Minister, Trevor Manuel, basked in the glory of it all. If they ever gazed into the future they saw f&#8212; all! They did nothing to accelerate growth rates that may have helped South Africa really grow. Mbeki also shunned the HIV/AIDS pandemic leaving us with 7 million HIV infections today.
To be kind Mbeki and Manuel were the patron saints of Great Pretenders.
For the last five years South Africa has achieved little more than struggle to contain the fantastic debt trajectory established between 2009 and 2012.
If South Africa is ever to be ‘ Free at last! Free at Last’ it is going to take a superhuman effort from all of us.
Every one of us can make a contribution instead of procrastinating and playing the blame game. As Kipling put it so many years ago when he wrote for his beloved son. 
If you can fill the unforgiving minute     With sixty seconds’ worth of distance run,    Yours is the Earth and everything that’s in it,        And—which is more—you’ll be a Man, my son! 
Now shove that in your pipe and smoke it! And see the numbers to the 2017/18 national budget work per the <a href="http://link.email.dynect.net/link.php?DynEngagement=true&amp;H=Kcx6DL4Dm6j8l5b8EGQG5sD79SAgq9f7Q5QkowEJ0Fx2l%2Bl%2BX2VFbW8DCwKpdCyuc5%2BOEfVv8EiLojP%2FsV1%2BmnPQMyAy%2BkvCz0Sl53G6wMTQf7muJDXs0w%3D%3D&amp;G=0&amp;R=https%3A%2F%2Fwww.youtube.com%2Fembed%2FhBHGpKWb2Vo%3Frel%3D0%26modestbranding%3D1&amp;I=20170223062401.000001753155%40mail6-23-ewr&amp;X=MHwxMDQ2NzU4OjU4YWU3ZmZhOWRjODYyNWE4YTI4OTdhMTs%3D&amp;S=0jAxebfTEgPSXtEt7ed0z0xnWtuWVNmGomfqy9sUp7w">VIDEO</a> .
Have a bottle of anti-diarrhetic ﻿handy! This is frightening stuff.
 
Professor Matthew Lester,  BCom (Rhodes) CA(SA) H Dip Tax Laws (Wits), is an Associate Professor at Rhodes Business School. In 2001, he was the winner of the Vice-Chancellor&#8217;s award for distinguished teaching. Apart from teaching at Rhodes, Matthew lectures to a wide range of South Africans on taxation and money matters. He also writes the weekly column ‘Tax Talk’ in the SundayTimes.﻿

Op-Ed: Budget 2017/18 – "The Great Pretenders?"

By now everyone has had some time to digest the Budget Speech, and specifically how the R28 billion increase in the tax burden that largely falls on individuals will impact us. The new top marginal tax bracket of 45% only applies to 103 000 taxpayers, who will on average pay R3 500 per month more in income tax. There are 7.4 million registered individual taxpayers in South Africa, but  6.5 million fall below the threshold income and don’t pay income tax.
The immediate market reaction to the Budget was fairly positive, but South African markets are so closely connected to global markets that it is often difficult to disentangle domestic from foreign drivers. Ultimately, one wouldn’t expect a big market reaction because the October mini-Budget already gave clear direction; last week was just a case of giving us the details.
Commitment to narrow the deficit
The 2017 Budget retains a commitment to narrowing the budget deficit to an internationally acceptable level of 2.6% of GDP over the medium term and stabilising the government debt to GDP ratio. Fortunately, unlike the previous four years, the global climate is more favourable this year. Global economic activity is speeding up, especially in Europe where economic growth has reached its fastest rate in six years and positive business and consumer sentiment suggests that it will be maintained.
Similarly, Japan is enjoying decent growth (by its standards). US economic growth is strong enough for the Federal Reserve to consider an interest rate increase soon. Commodity prices have firmed up substantially over the past year, and investor sentiment towards emerging markets has improved, reversing the sustained capital outflows of the previous five years. When Minister Gordhan delivered the Budget Speech last year – soon after he was parachuted into the position – the rand was at R15.26 against the US dollar. Last week, it closed at R12.94.
South Africa benefits from all these trends, and the local economic outlook has therefore improved. In the short term, fiscal consolidation is a drag on economic growth, but should not derail this recovery. Whereas the economy barely grew in real terms last year, Treasury expects growth to rise to 2.2% over the next three years. These numbers represent an improvement off a low base, however, and will not dent the unemployment rate.
Perhaps the biggest criticism of the Budget was the lack of reform announcements and measures to stimulate growth. But it is important to remember that the Minister of Finance and the National Treasury control Government’s finances and not economic policy and implementation.
Hurdles for a ratings reprieve
Consider the ratings outlook, for instance. In a recent panel discussion, S&amp;P Global’s local representative reiterated that South Africa’s ratings hinge on three issues. Firstly, expectations for improvement in economic growth and fiscal performance. Secondly, signs of weakening institutions would put downward pressure on ratings since it could lead to a deteriorating investment climate. Thirdly, risks posed to Government’s finances by the State Owned Enterprises (SOEs).
Of the above, the Minister only has direct control over the fiscal performance, and even there not as much as he would like. To begin with, the overall thrust of fiscal policy is a Cabinet decision, not Treasury’s alone. But the actual outcome of fiscal policy is dependent on the performance of the economy. The problem over the past four years has precisely been that the weak economy has put tax revenue under pressure. Complicating matters somewhat is that the economy responds to fiscal policy too. For instance, sharp tax hikes could choke off the nascent recovery. On the other hand, tax incentives can encourage growth and job creation in targeted sectors, as the World Bank recently pointed out.
South Africa’s institutional strength was stress-tested last year. When flimsy charges were brought against Pravin Gordhan, the combination of media freedom, a vibrant civil society and independent courts prevailed. And our central bank was willing to hike rates to maintain its inflation-fighting credentials even though there was an election around the corner. The election itself and the subsequent peaceful transfer of power in key metros also demonstrated the strength of our institutions. Few, however, doubt that 2017 will see further strains as we gear up for the ruling party’s elective conference at year-end. Major policy shifts before the conference are unlikely.
In terms of the SOEs, there is some control by Treasury, since Treasury signs the guarantees that make up Government’s contingent liabilities of around 10% of GDP. But the overall structure, objectives and governance of the SOEs rests with Cabinet, not with Treasury. The financial underperformance of the large SOEs &#8211; the return on equity of the 16 largest SOEs in the 2015/16 fiscal year was only 0.8%, well below any reasonable estimate of the cost of capital &#8211; is not only a drag on the fiscus, it can also hamper economic growth.
It is also important not to lose sight of South Africa’s ratings strengths. These include world-class financial markets and a well-capitalised banking sector. Government is therefore not dependent on borrowing in fickle foreign markets, exposing it to currency swings (foreign debt is only 10% of the R2 trillion total).
As long as economic growth improves in the short term, and provided there is no institutional deterioration, South Africa can hold on to its investment grade rating. This would be a positive surprise, given that global market pricing places us in the same camp as other “junk” economies like Russia and Brazil.
Structural reform needed
Faster economic growth over the longer term is not only important for job creation, it is also necessary for fiscal sustainability as it will lead to growing tax revenues for Government, which can be spent on welfare, education and health without resorting to additional borrowing. Structural reforms to lift the long-term growth rate include lowering barriers of entry to increase competition between firms, providing young people with easier access to the job market, ensuring fewer strikes, improving transport infrastructure, attracting skilled immigrants until such time as our own people are better equipped, effective land reform and greater regulatory certainty, especially in capital-intensive industries like mining.
The first chapter of the Budget Review highlights that 2016 was the first year private fixed investment contracted since global recession, a sign of rock-bottom confidence. It then lists a number of items on Government’s to-do list that could lift investment (including finalising mining regulation, expanding the independent power programme, and concluding analogue to digital migration) where responsibility rests with other departments within Government. Unsaid, of course, is the lack of certainty around the position of the Finance Minister, which has drained business and investor confidence over the past 14 months.
 
Chart 1: Rand-dollar exchange rate
 <img loading="lazy" decoding="async" src="/media/19341300/old_mutual_chart_1_27_feb_2017_598x294.jpg" width="598" height="294" alt="Old Mutual Chart 1 27 Feb 2017"/>﻿
Source: Datastream
 
Chart 2: Projected consolidated budget deficits
<img loading="lazy" decoding="async" src="/media/19341307/old_mutual_chart_2_27_feb_2017.png" width="568" height="265" alt="Old Mutual Chart 2 27 Feb 2017"/>﻿
 
Source: National Treasury﻿

S.A: Beyond the 2017 Budget

The 2017 budget speech takes place at a time when the fiscus is under pressure. Unsurprisingly, the Minister has raised the necessary additional revenue by primarily increasing personal taxes. This comes through in the form of lower bracket creep relief, a new tax bracket for high income earners, a higher dividend withholding tax rate and higher indirect taxes.  All this places greater pressure on consumers and their ability to save while at the same time making tax preferred vehicles, such as retirement funds, all the more attractive. 
We are encouraged by National Treasury’s ongoing initiative to drive retirement and social security reform, as we believe this demonstrates a positive reinforcement of the need to implement measures to encourage retirement savings among South Africans. We welcome the clarity on how the R350 000 cap should be applied, although we would have liked to see this cap increase with inflation.  The ability to preserve benefits post retirement is also a positive move. 
The increase in the annual allowance for Tax Free Savings, which was increased from R30,000 to R33,000 is also pleasing. This is yet another vehicle that individuals can use to avoid dividend withholding tax and capital gains tax. Although the lifetime limit of R500,000 wasn’t mentioned, it is unnecessary at this stage as we’re only entering the third year since its introduction and we trust that this limit will also be adjusted in time.
No update was announced regarding the annuitisation requirement for provident fund members, which formed part of the Tax Laws Amendment Act that was introduced 1 March 2016 but postponed to 1 March 2018. It is encouraging that Government is continuing to engage with key stakeholders to reach a consensus and we trust that a final decision in this regard will be made well before the proposed implementation date of 1 March 2018.
In terms of social security reform, the Government acknowledges in the budget that this will take time to implement and we support the need to seek short-term endeavours to address the chronic underfunding of retirement that South Africa faces.
One such suggestion is compulsory auto-enrolment of employees into a fund by their employers, which would make it compulsory for an employer to offer their employees a retirement fund structure. Our research shows that many South Africans hold a poor view of their current and future financial situation.  This reform, if introduced, has the potential to enable the retirement system to better prepare more South Africans for a financially secure retirement.﻿

S.A's Budget 2017 makes retirement funds attractive

S.A's 2017 Budget Speech

What you need to know about Budget 2017
South Africa’s Budget 2017 revealed that revenue has lagged behind the economy, leading to R30bn shortfall, to deal with this shortfall several tax changes have been proposed as highlighted below. It also painted an economy in dire need of economic growth. This is also mentioned in this Budget in a nutshell.
New taxes on the way
<ul>
<li>Revenue has lagged behind the economy, leading to R30bn shortfall</li>
<li>Total tax revenue for 2016/17 will be R1.14trn, up 7% on previous year</li>
<li>S.A’s tax proposals will raise an additional R28bn</li>
<li>A wealth tax will be introduced comprising a new top personal income tax rate of 45% for those with taxable incomes above R1.5mn. It is expected to bring in between R3bn-R5bn.</li>
<li>Dividend withholding tax rate to be increased from 15% to 20%</li>
<li>Treasury is looking at share repurchase schemes</li>
<li>Tax free threshold increased from R75 000 to R75 750</li>
<li>Personal tax changes are as follows:<img loading="lazy" decoding="async" src="/media/19338669/personal_tax_598x432.jpg" width="598" height="432" alt="Personal Tax"/>﻿</li>
</ul>
<ul>
<li>Fuel levy to increase 30c/litre and road accident fund levy &#8211; 9c/litre</li>
<li>Excise duties for alcohol and tobacco to increase between 6-10% </li>
<li>Relief will be provided in the affordable housing market</li>
<li>Annual allowance for tax free savings accounts increases from R30 000 to R33 000</li>
<li>Medical tax credit will be increased in line with inflation</li>
<li>Consultations ongoing on tax on sugary beverages </li>
<li>Proposed design of sugar tax has been revised to include both intrinsic and added sugars </li>
<li>Sugar tax will be implemented later this year once details are finalised and legislation passed</li>
<li>Proposed carbon tax &amp; implementation date will be considered in Parliament this year </li>
<li>S.A to sign a multilateral instrument this year</li>
<li>SARS received VDP disclosures totalling R3.8bn in foreign assets</li>
<li>Special VDP will be open until the end of August this year</li>
<li>Multinational companies will be required to file further information with SARS</li>
</ul>
The State of S.A
<ul>
<li>S.A’s income growth has been uneven</li>
<li>95% of S.A’s wealth is in the hands of 10% of the population</li>
<li>35% of the labour force are unemployed</li>
<li>Over half of all children in Grade 5 cannot read adequately in any language</li>
<li>A Charter of Economic Rights needs to be debated to deal with these glaring inequalities </li>
</ul>
The State of S.A’s economy
<ul>
<li>S.A’s growth has been too slow at 1% a yr in real per capita terms</li>
<li>S.A’s transformation will be built through economic participation, partnerships</li>
<li>R28bn to be raised in taxes</li>
<li>S.A’s budget deficit for 2017/18 will be 3.1% of GDP</li>
<li>S.A’s government debt will stabilise at about 48% of GDP over next 3yrs</li>
<li>Spending priorities: Education, health services &amp; municipal functions in rural areas IMF projects world economy to grow by 3.4% in 2017 &amp; 3.6% in 2018 Economic inclusion is being prioritised everywhere S.A’s GDP expected to increase from 0.5% last yr to 1.3% 2017 S.A growth to be spurred by commodity prices rebounding Plans are afoot to get S.A out of the present low growth trap</li>
<li>S.A is finalising legislation relating to mining development &amp; land redistribution</li>
<li>S.A is implementing transition from analogue to digital television</li>
<li>S.A is continuing its independent power producer programme</li>
</ul>
S.A’s 2017 Budget  Allocations:
<ul>
<li>R3.9 billion for small, medium and micro enterprises and cooperatives.</li>
<li>R4.2 billion for industrial infrastructure in special economic zones and industrial parks.</li>
<li>R1.9 billion for broadband implementation.</li>
<li>R3.9 billion for the Council for Scientific and Industrial Research.</li>
<li>An additional R494 million for tourism promotion.</li>
<li>An additional R266m to support the aquaculture sector and realise the goals of the Oceans Economy Phakisa Operation.</li>
<li>Spending on agriculture, rural development and land reform amounting to nearly</li>
<li>R30 billion by 2019/20.</li>
<li>Provincial Roads Maintenance Grant is allocated R10.8 billion in 2017/18</li>
<li>SANRAL receives R15.4 billion over the period</li>
<li>The Department of Telecommunications and Postal Services receives R1.9 billion</li>
<li>The Passenger Rail Agency of South Africa to receive R16.7 billion</li>
<li>Public Transport Network Grant receives R6.2 billion in 2017/18.</li>
<li>R600 million over the medium term is reprioritised to the Social Housing</li>
<li>R18.4 billion over the medium term is allocated to the Regional Bulk Infrastructure Grant</li>
<li>R12.5 billion to the Water Services Infrastructure Grant</li>
<li>R1 billion is added to the local government equitable share in 2018/19</li>
<li>An additional R5bn to the R32bn previously announced has been allocated to higher education</li>
</ul>
The shape of S.A’s finances
<ul>
<li>The proposed expenditure for 2017/18 totals R1.56 trillion</li>
<li>Interest on debt amounts to R169 billion</li>
<li>Projected revenues amount to R1.41 trillion</li>
<li>The balance of R149 billion, or 3.1% of GDP, will be borrowed</li>
<li>S.A’s government debt stands at R2.2 trillion, or 50.7% of GDP</li>
<li>Funds available after providing for debt service costs &amp; contingency reserve up 6.9% to R1.24trn next year; are projected to rise to R1.43 trillion in 2019/20</li>
</ul>
Over the next three years:
<ul>
<li>47.5% of available funds will be allocated to national government</li>
<li>43.4% to provinces and</li>
<li>9.1% to local government</li>
</ul>
Public service wage bill
<ul>
<li>Provincial spending on personnel has declined to just under 60% in 2016/17</li>
</ul>
Social grants
<ul>
<li>Three new conditional grants will take effect in 2017/18</li>
<li>National Treasury &amp; provincial treasuries to focus on four “game changers”</li>
<li>Social assistance grants to be increased in April</li>
</ul>
S.A’s social grant allocations:
<ul>
<li>The old age grant will increase by R90 to R1600 for pensioners over the age of 60, and R1620 for those over 75.</li>
<li>The disability and care dependency grants also increase by R90 to R1600 a month.</li>
<li>Foster care grants increase by R30 to R920 a month.</li>
<li>The child support grant increases by R20 to R380 a month</li>
</ul>
NHI
<ul>
<li>Eleven NHI pilots have yielded valuable insights, on which to build</li>
<li>NHI Fund will be established</li>
</ul>
Education
<ul>
<li>Spending on basic education next year will be over R240bn</li>
<li>The Heher Commission of Inquiry into Higher Education will complete work by June</li>
</ul>
Procurement
<ul>
<li>Public procurement will amount to about R1.5trn over next 3yrs</li>
<li>Further procurement reforms to be introduced this year</li>
<li>Draft Public Procurement Bill to be published shortly</li>
</ul>
Forex collusion among banks
<ul>
<li>Market conduct regulator proposed</li>
<li>Banks need tougher rules to cover financial market abuses</li>
<li>SARB &amp; Treasury have initiated work on a more comprehensive Financial Markets Review Financial Sector Summit to take place in 2017 ﻿</li>
</ul>

Budget highlights 2017: How it affects you

Whether you’re concerned about your taxes going up, education or infrastructure funding, #Budget2017 will have something for you. Pan-African business and financial news leader CNBC Africa in partnership with Discovery Invest will break from regular programming to bring you live coverage and analysis of South Africa’s Budget on Wednesday, February 22nd 2017.
South Africa’s Finance Minister, Pravin Gordhan’s speech will be one of his toughest yet.
He is expected to touch on: the economy; how government, civil society, unions and business can work synergistically and harmoniously together; education; taxes; and inclusive growth.
Tune into CNBC Africa, DStv channel 410 from 13h30 CAT on 22 February. Alternatively, livestream via CNBC Africa’s YouTube channel <a href="https://www.youtube.com/watch?v=ThndtDo7WFA">https://www.youtube.com/watch?v=ThndtDo7WFA</a> or website <a href="/tv/cnbc-africa-live/">/tv/cnbc-africa-live/</a>
On the day CNBC Africa will bring you the following programming line-up:
13:30 – 14:00      Pre-Budget Analysis 14:00 – 15:30      Live Budget Speech 15:30 – 16:30      Post-Budget Analysis 16:30 – 17:00      Tax Professionals’ Analysis of Budget 17:00 – 17:30      CEOs’ Analysis of Budget          17:30 – 18:00      Savings and Retirement Panel Discussion 18:00 – 18:30      Market Analysis of Budget 18:30 – 19:00      Socio-Political Analysis of Budget 19:00 – 19:30      Youth’s reaction to Budget  19:30 – 20:00      Highlights Special
Follow the conversation on Twitter@CNBCAfricausing the hashtags#DiscoveryInvestand#Budget2017
-ENDS-
For further media information, contact:
Monique Vanek
CNBC Africa’s News Editor
+27 11 384 0300
<a href="mailto:Monique.Vanek@abn360.com">Monique.Vanek@abn360.com</a>
Twitter: @CNBCAfrica﻿

CNBC Africa Brings you South Africa’s Budget 2017

An increase in personal income tax rates and the marginal rate of tax for high income earners – which will more than likely be announced in this week’s National Budget Speech – will be a bitter pill to swallow in the short term. However, if this does happen, it will provide a good opportunity to boost long-term retirement savings.
This is the opinion of Jill Larkan, Corporate Liaison Executive at financial advisory and wealth management business GTC.
“Given the country’s growing revenue shortfall and the National Treasury’s limited options for raising income, commentators are expecting that personal income tax rates and the marginal rate of tax will be raised, with high earners likely to be affected the most.”
While higher taxes rates might be undesirable, she believes it may bring a silver lining for individuals’ retirement benefits.
“An increase in tax rates can be an excellent opportunity for boosting retirement savings – be it pension funds, provident funds or retirement annuities – because these long-term savings are tax-deductible,” she explains.
According to Larkan, contributions to a retirement fund can be deducted from individuals’ total tax liability, up to a rate of 27.5% of either their remuneration or taxable income (whichever is the greatest).
“This is a very attractive incentive from the government for individuals to increase their retirement contributions, so that more people can retire comfortably,” explains Larkan.   “Even though this deduction is capped at a maximum annual amount of R350 000 we believe it is one of the best ways to maximise the long-term benefits from current retirement contributions.”
She adds: “Most of the retirement funds in South Africa – including GTC’s umbrella fund range – allow for individuals to make additional voluntary contributions to retirement savings, in order for them to get the biggest advantage from increasing their contributions.”
Larkan believes pension fund options are also well-structured for investment growth.
“An additional advantage of retirement savings is that the fund’s investment growth does not attract income tax or capital gains tax, which means individuals get the maximum benefit from appreciation in the fund’s value.”
She adds: “Looking further down the line, individuals currently receive an amount of up to R500 000 tax-free from their total lump sum upon retirement, with the balance taxed at favourable rates, which is much lower than marginal rates.
Other expectations ahead of the 2017 National Budget Speech
Larkan does not expect the Minister of Finance to announce any changes regarding the tax-deductible limits, or the tax scales that apply to withdrawal, death, retirement and retrenchment benefits payable from retirement funds.
“These limits have recently been changed (with effect from 1 March 2016) so we anticipate this to remain unchanged for the time being.”
Larkan says they will keep an eye on developments regarding the government’s proposed treatment of provident fund benefits, following opposition from trade unions last year.
“It would be interesting to see if there are any announcements regarding the future annuitisations of provident funds after 1 March 2018, considering developments between the government and trade unions,” she concludes.﻿

South Africa Budget Day

SA’s Medium-term budget highlights

SA’s 27% unemployment tops spending priorities-MTBPS

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SA Government could lose sight of Vision 2030

Radical Economic Transformation remains the next phase of SA’s growth-MTBPS

More than 30 million S.Ans live on less than R1000-MTBPS

SA’s 2017 MTBPS: A fixed income perspective

Guidance for Gigaba

South Africa’s Gigaba faces credibility test in maiden budget speech

This is what SA’s FinMin Gigaba needs to consider when he gives his maiden medium term budget policy statement

Ivory Coast trims budget, growth forecast for 2017

Op-Ed: Budget 2017/18 – "The Great Pretenders?"

S.A: Beyond the 2017 Budget

S.A's Budget 2017 makes retirement funds attractive

S.A's 2017 Budget Speech

Budget highlights 2017: How it affects you

CNBC Africa Brings you South Africa’s Budget 2017

Will S.A's 2017 Budget bode well for retirement savings?

News Tips

Advertise With Us

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