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Thu Apr 24 11:49:45 SAST 2014

Reactions to the Budget Speech

Times LIVE, Sapa | 27 February, 2013 16:06
Minister of Finance Pravin Gordhan. File photo
Image by: The Times / Esa Alexander / Gallo Images

All the reactions to Finance Minister Pravin Gordhan's Budget Speech.

Budget: 'No impact on property market' - Sapa

Finance Minister Pravin Gordhan's 2013 Budget will have no impact on the residential market, Jawitz Properties CEO Herschel Jawitz said on Wednesday.

"The 'business as usual budget' with regard to residential property was not unexpected, and will have no impact on the residential market in the year ahead," he said in a statement.

Transfer duty and the capital gains tax, which remain unchanged, were the two main issues with which the industry was grappling.

"A drop in the threshold, or rate, would have certainly provided a welcome boost, especially for the lower end of the market, and for first-time buyers."

Transaction costs for buying property were relatively high.

"Coupled with deposit requirements from the banks, a first-time buyer purchasing a home of R800,000 may need to have as much as R80,000 in cash to put down, pay legal fees and transfer duty," he said.

"Many buyers simply don't have that kind of money and are being kept out of the market despite being able to afford monthly repayments, as interest rates are at low levels."

Budget was 'forward-looking' - Sapa

Finance Minister Pravin Gordhan's 2013 Budget was "very forward-looking" in that deadlines were announced for changes in future, a tax expert said on Wednesday.

"Tax payers can breathe a sigh of relief, because overall the status quo remains," said Willem Oberholzer of tax and advisory firm Grant Thornton Pretoria.

He said the government appeared to be consolidating its position on taxes.

"We've seen tax reforms for at least three years that were very big and this year is different."

He said Gordhan's "more compliance-themed" budget for 2013 seemed to focus on consolidating and collections.

"The effect of the proposed changes is that they will seek to collect 11 percent more from individuals compared to only 8.6 percent more from corporates."

Neville Sweidan, head of forensic services at Grant Thornton Johannesburg, said Gordhan provided a long discourse on the government's determination to fight corruption, with particular reference to procurement.

But he said there was already a lack of seriousness in enforcement, although mechanisms like the Public Protector existed.

"There appears to be up to now a lack of political will to utilise these mechanisms to their best advantage."

Budget 'tough, conservative: Cope - Sapa

The 2013 Budget is "tough and conservative", but is exposed to factors outside the control of the Treasury, Cope said on Wednesday.

It was a "no-surprise, conservative budget, but [a] huge risk if labour is not supporting it", the Congress of the People said in a statement.

It was clear Finance Minister Pravin Gordhan had built it based on ability to grow the economy.

The fact that he had taken the National Development Plan (NDP) as its point of departure was to be welcomed.

However, the NDP's annual growth rate of more than five percent was in contrast with reality.

"We see a revenue shortfall of R16.3 billion and a deficit of 5.2 percent in 2012/13, and [a] debt ratio stabilising above 40 percent, costing us R100bn in debt servicing costs next year.

"The fact that the deficit will go down to 3.1 percent in 2015/16 is built on 'economic growth projections', making fiscal policy vulnerable."

The country's ability to open new markets this year would be vital.

On tax spending and debt, Cope said the announcement that the SA Revenue Service had collected R16.3bn less than expected in revenue "is not good news".

So too, the 23 cents a litre increase in the fuel levy.

"The success [of the budget] will lie in the implementation of the NDP, changing domestic sentiment for investment by business, and getting labour to support the same goals.

"The fact that this budget is done within the framework of the NDP must send a strong message to investors and be a boost for business consideration," it said.

Budget not all bad: UDM - Sapa

Not all of Finance Minister Pravin Gordhan's 2013/14 Budget tabled in Parliament on Wednesday is "bad news", the UDM said.

"Considering the challenges he is faced with, he has presented us with a responsible budget," said United Democratic Movement deputy secretary general Nqabayomzi Kwankwa.

Gordhan had the difficult task of allocating funds for a government which was "doing a lot more, but doing it less well".

With a budget deficit of 5.2 percent, a current account deficit of about six percent, and government debt of just over 40 percent, it was clear that there was very little room to manoeuvre.

To embark on fiscal consolidation, the government would have to root out corruption and wasteful spending.

However, the UDM was concerned about the negative affect of the increased fuel levy, together with the constant rise in the fuel price on the cost of living for South Africans -- especially the poor, Kwankwa said.

2013/14 Budget gets broad support - Sapa

Finance Minister Pravin Gordhan's 2013/14 Budget tabled in Parliament on Wednesday appears to have found broad favour among political parties and business.

Democratic Alliance spokesman Tim Harris said Gordhan had "opened the door to several DA policies".

"First and foremost, the idea that the youth wage subsidy is back. In a watered down form, it's about R500 million for that youth wage subsidy.

"The previous incarnation was R1.6 billion; nevertheless it is there and I hope he has the political capital to implement it.

"If he actually does what he said today... it will make a big impact on creating jobs for young people. However, three years ago he announced the same thing and Cosatu's [Congress of SA Trade Union] opposition prevented it from being implemented."

Harris also welcomed the idea that special economic zones would receive "boosted" tax incentives.

African Christian Democratic Party spokesman Steve Swart broadly welcomed the "conservative budget".

Gordhan had not been swayed from the "government's prudent, counter-cyclical fiscal policy" -- despite negative factors such as the labour unrest in mining and agriculture.

However, Swart did warn that the budget deficit and spiralling debt service costs should be contained.

Freedom Front Plus leader Pieter Mulder said implementation of the budget would be the litmus test to judge its success.

"Let's be thankful there is a plan... the test will be the implementation."

Mulder was pleased with Gordhan's announcement that the Chief Procurement Office was being set up as a means to combat corruption.

ANC secretary-general Gwede Mantashe believed the budget fitted well with the party's development programmes.

"I'm quite happy in the sense that we are beginning to see numbers now allocated to a programme that has evolved over a period of time."

It was pleasing that the government was not spending on consumption, but investment for the future, he said.

Business Unity SA (Busa), expected the business sector to respond positively.

"We share the goals of the minister. We want to see an economy better, bigger and stronger," said Busa special policy adviser Raymond Parsons.

"We believe the National Development Plan (NDP) is the instrument that we need to do that. It also helps to create a climate of more predictability and certainty in the policy environment."

He said it remained important the NDP be implemented on a sustainable fiscal basis, with Busa echoing Gordhan's warning that to achieve this required higher growth and employment.

Gordhan also announced, among others, unexpected personal income tax relief of R7bn, along with concessions to small businesses.

Economic growth was projected at 2.7 percent in 2013, 3.5 percent in 2014, and 3.8 percent in 2015.

The budget provided for consolidated spending of R1.15 trillion, and revenue of R985.7bn, for an expected deficit of 5.2 percent, dropping to 3.1 percent in 2015/16.

The current account deficit was expected to average 6.2 percent over the next three years

Gordhan said a review of the tax policy framework -- and its role in supporting the objectives of inclusive growth, employment development, and fiscal sustainability -- would start this year.

From March next year, an employer's contribution to retirement funds on behalf of an employee would be treated as a taxable fringe benefit in the hands of the employee.

Individuals would, from that date, be allowed to deduct up to 27.5 percent of the higher of taxable income or employment income for contributions to pension, provident, and retirement annuity funds, with a maximum annual deduction of R350,000.

Contributions above the cap would be carried forward to future tax years.

Gordhan said the 2013 Budget took the NDP as its point of departure.

"The strategic plans of government and the medium-term expenditure plans will be aligned to realise our objectives."

The government had taken measures to control growth in spending, and spending plans had been reduced by R10.4bn through re-prioritisation, savings, and a draw-down on the contingency reserve.

He said the government remained committed to the large-scale infrastructure investment programme.

The path of spending and the recovery in revenue would stabilise debt at just higher than 40 percent of GDP.

"In this budget we continue to invest in education, health, housing, public transport, and social development components of the social wage, which add up to about 60 percent of public expenditure," he said.

Some of the foundations of faster growth were in place. Strong capital investment by the public sector, the addition of electricity-generating capacity, relatively stable inflation, and low interest rates would support improved growth rates over the medium term.

"But this is not enough. Much more is needed. In particular, a significant increase in private sector investment and competitiveness is needed in the wider economy.

"Agriculture, manufacturing, tourism, communications -- every sector has to play its part in expanding trade, investment and job creation."

National development should be coupled with fiscal sustainability, to ensure that progress made would not be interrupted or reversed.

"The government relies on resources derived from the wider economy, and the best way to generate resources is to grow the economy faster and increase the tax base."

Gordhan also had a word of warning against tax avoidance and non-compliance.

"We also owe it to our taxpayers to ensure they are not carrying the burden of those who benefit from our country's infrastructure and resources without paying their fair share of the costs."

The SA Revenue Service (Sars) was currently engaging with companies which had their base of operations in South Africa, but appeared to have shifted a large proportion of their profits to low tax jurisdictions, where only a few people were employed.

"This is unacceptable. Sars is also pursuing schemes identified under the revised general anti-avoidance rules, following several years' painstaking work tracing transactions through multiple jurisdictions and entities."

Sars was also targeting other areas of non-compliance, including recipients of government spending

Fedusa welcomes budget comments - Sapa

The Federation of Unions of SA (Fedusa) has welcomed certain aspects of the 2013 Budget tabled by Finance Minister Pravin Gordhan on Wednesday.

"Under the circumstances we are finding ourselves, where the economy is starting to recover, we welcome some comments in the budget," Fedusa general secretary Dennis George said.

He said Fedusa hoped the government would deal with youth incentive schemes appropriately.

"We are concerned that companies might want to misbehave and send out older and experienced workers, in favour of younger workers," George said.

"However, the minister said this would be discussed further in Parliament and we welcome that."

Gordhan said in tabling the Budget that tax incentives to employ young people, and for people employed in the special economic zones (SEZ), were on the cards.

He said a revised youth employment incentive would be tabled in the National Assembly, together with a proposed employment incentive for SEZs.

George said the country's leaders needed to be a "bridge of trust" to citizens.

"People are looking up to leaders for direction. The economy is in our hands, not in the hands of the market."

Government pushing ahead with land redistribution - Sapa

The government is set on acquiring more than 310 000 hectares of agricultural land for redistribution by next year, according to Finance Minister Pravin Gordhan.

The 2013 Estimates of National Expenditure, tabled by the minister on Wednesday, stated that this formed part of the government's "eventually redistributing 25 million hectares".

It was also seeking to "recapitalise and develop" 368 new farms by 2014, and to train 400 farmers as "mentors" by that time.

The new budget allocates R3.4 billion to land reform in the coming financial year (2013/14); a further R3.5 billion in 2014/15; and R3.5 billion in 2015/16.

"The spending focus over the medium term will be on the recapitalisation and development of distressed farms; and land acquisition to increase access to, and the productive use of, land."

The government has recently reiterated its intention to move away from the willing-buyer, willing-seller model of land reform, favouring what it calls the "just and equitable" principle for compensation.

According to the estimates document, 696 farms have been "recapitalised and developed" to date, 389 of which were bought through "the pro-active land acquisition strategy", and 307 under land reform grants.

"[A total of] 6,971,293 hectares have been acquired to date."

It stated that over the medium term, spending on the land reform programme was "expected to increase to acquire 353,234 hectares of land to speed up the land reform process and recapitalise, and restore 500 farms in distress".

Budget ensures value for money: African People's Congress - Sapa

Finance Minister Pravin Gordhan's 2013 budget ensures value for money under challenging economic circumstances, African People's Congress leader Themba Godi said on Wednesday.

"He [Gordhan] has been able to navigate his way around, especially in terms of prioritising spending and ensuring that there is value for money," Godi said.

The appointment of a chief procurement officer and the work by the SA Revenue Service in collecting taxes would help ensure that available resources were used to benefit the country, he said.

As Parliament's Standing Committee on Public Accounts chairman, Godi said the committee would contribute further and work with the government to fight corruption.

"We have the best tax collection system in Africa, but the problem has always been how to best spend the money that has been collected.

"We will be watching closely on what measures government is taking to fight corruption."

CCMA allocations welcomed - Sapa

Additional allocations to the Commission for Conciliation, Mediation and Arbitration (CCMA) should be welcomed by the "entire" industrial community, a law firm said on Wednesday.

"The CCMA is the busiest labour dispute resolution centre in the world," Cliffe Dekker Hofmeyr Inc director Johan Botes said in reaction to Finance Minister Pravin Gordhan's 2013 budget speech.

"The last available figures [in the CCMA's 2012 annual report] indicate that a total of 649 new cases are referred to it every day."

He said a significant number of cases ended up in arbitration, the labour court or lock-outs.

"Any additional resources that could be allocated to the CCMA can only assist this organisation in further limiting the burden on the arbitration and court processes, and the risk of industrial action," he said.

Botes said appointing more commissioners to the CCMA would add "greatly" to limiting destructive trends in labour

Tobacco prices to go up in March: BAT  - Sapa

Smokers will feel the impact of the 2013 Budget on cigarette prices next month, British American Tobacco (BAT) SA said on Wednesday.

"This increase is announced in a context of already high tobacco taxes and where the company remains seriously concerned with the proliferation of cheap illegal cigarettes... due to illegal operators avoiding these very same taxes," said BAT regulatory affairs head Leslie Rance.

Earlier, Finance Minister Pravin Gordhan announced that the tax on cigarettes would increase by 60c to R10.92 per packet of 20.

This meant the recommended retail price for BAT SA's biggest selling brand, Peter Stuyvesant, would increase by R1 to R28,50.

The new pricing would be in effect for orders from March 4.

The company was worried about the increasing prevalence of the illegal cigarette trade, as independent industry research suggested these cigarettes accounted for 30 percent of the South African cigarette trade.

"While we remain encouraged by government's response to the problem of illegal cigarettes, the reality is that illicit trade is on the increase and we are expectant of further supportive actions to drive down this growing trend...," Rance said.

Life skills training essential: Madanhire - Sapa

Students entering tertiary education need to be equipped with the life skills to cope with the responsibility of studying for a degree, an education specialist said on Wednesday.

Responding to the 2013 budget by Finance Minister Pravin Gordhan in Cape Town, Godfrey Madanhire said he believed the government's spending should equip students with the necessary skills.

"Tertiary education needs to be made available to a greater number of students, who need to have the life skill to cope with the stress and responsibility of completing a degree or diploma," said Madanhire.

"The fact that around 40 percent of [the] 18- to 29-year-old age group is unemployed should be a wake-up call for everyone.

He said pouring millions of rand into Further Education and Training colleges and Sector Education and Training Authorities was pointless if only around a quarter of the students who started university graduated.

"Children who have had no effective life skills training at primary and secondary school level will most likely flunk out at tertiary," he said.

"They do not have the mental, emotional or social resources to cope with the pressures of further education."

In his Budget speech, Gordhan said that over the next year, the basic education sector would focus on improving numeracy and literacy skills, expanding Grade R enrolment and reducing school infrastructure backlogs.

"The total number of students enrolled in higher education institutions is expected to increase from 910,000 currently to 990,000 in 2015," he said.

"Funding has been allocated for the construction of new universities in the Northern Cape and Mpumalanga to commence this year."

Carbon tax 'too little, too late': Greenpeace - Sapa

The introduction of a carbon tax in 2015, as announced in the 2013 national Budget, may not be sufficient to address climate change, Greenpeace Africa said on Wednesday.

"While the proposed carbon tax should ensure that the true cost of carbon intensive industries are included in their costing, its application in 2015 might be too little, too late," spokesman Mbong Tsafack said in a statement.

Finance Minister Pravin Gordhan said earlier that a carbon tax of R120 per ton of carbon dioxide-equivalent would be implemented from January 1, 2015.

However, a tax-free exemption threshold of 60 percent would be set to "soften the blow", Gordhan said.

Tsafack said climate change required immediate action.

Greenpeace Africa also believed South Africa needed an ambitious infrastructure investment in renewable energy.

"Investments in renewable energy not only provide a far better option to bio-fuels, but go a long way in addressing the concerns of job creation...," he said.

More effecient health spending: BMF - Sapa

South Africa needs to spend money allocated to health care more efficiently, the Board of Healthcare Funders of SA (BMF) said on Wednesday.

"South Africa already spends 8.5% of its GDP [Gross Domestic Product] on health and still has poor health outcomes when compared to similar middle-income countries," BHF managing director Humphrey Zokufa said in reaction to the national Budget unveiled on Wednesday.

"It is evident that South Africa needs to more efficiently use the money it already spends on health care."

Zokufa is also a member of the national health insurance (NHI) ministerial advisory committee.

He said the NHI model could be similar to the Gautrain model where the private sector was contracted by government to fulfil the function of building the entire system.

"This model creates flexibility and establishes an appropriate platform to attract , retain, contract and remunerate the required skills and expertise adequately," he said.

In his Budget speech, Gordhan said pilot NHI projects had been initiated in 10 districts in 2013.

"[This]...will include improvements to health facilities, contracting with general practitioners and financial management reforms," Gordhan said.

"A new conditional grant is introduced this year to enable the national department of health to play a greater role in co-ordinating these reforms."

He said the initial phase of the NHI would not place any "new revenue demands" on the fiscus.

"Over the longer term, however, it is anticipated that a tax increase will be needed. The National Treasury is working with the department of health to examine the funding arrangements and system reforms required for NHI."

Tourism deserves more: Protea group - Sapa

Tourism should not be a poor cousin to education and health, a major hotel chain said in reaction to the 2013 national Budget unveiled on Wedneday.

The tourism industry is a major force in job creation and skills devolution, Protea Hospitality Group CEO Arthur Gillis said.

"[It] should not be seen as a frivolous or poor cousin to the weightier ministries."

"Tourism is one of the fastest growing industries in South Africa and contributes more than eight percent of the country's gross domestic product."

Gillis said last year the department of tourism's budget allocation grew by 2.07 percent and this year's allocation was "not much greater".

He welcomed Gordhan's announcement that new rules would soon be tabled to simplify the time and cost involved in doing business across Africa.

"As a company we are planning to double our hotel representation in Africa within the next five years, so anything to simplify that process cannot happen soon enough."

Budget spot on: Mantashe - Sapa

Finance Minister Pravin Gordhan's Budget speech on Wednesday fitted well with the development programmes of the ruling party, the African National Congress said.

"I'm quite happy in the sense that we are beginning to see numbers now allocated to a programme that has evolved over a period of time," said ANC secretary-general Gwede Mantashe.

Gordhan said his 2013 Budget was part of the implementation of the National Development Plan.

Mantashe said the expenditure figures on education, housing and health fitted well with the ruling party's plans of advancing the economy.

He said it was pleasing that government was not spending on consumption but investment for the future.

Citizens should not worry about that the budget deficit was beyond 40 percent of the country's Gross Domestic Product (GDP).

"If you are investing in infrastructure, therefore the deficit is increasing. You are not wasting that money. You are putting it to increase the capacity of the economy and increase the engine of the economy to the future," he said.

On government's effort to fight corruption Mantashe said: "Results you will see when you want to see them. The problem with us in South Africa is that sometimes we close our eyes to progress. We always look for the negative all the time."

Proof is in the pudding: Mulder - Sapa

The implementation of Finance Minister Pravin Gordhan's budget will be the litmus test to judge its success, Freedom Front Plus leader Pieter Mulder said outside Parliament on Wednesday.

"Let's be thankful there is a plan... the test will be the implementation," said Mulder.

He said last year's labour unrest caused R17 billion in a loss of revenue and a rise in debt but the balanced nature of the budget served to address the short-fall.

Mulder was pleased with Gordhan's announcement that the Chief Procurement Office (CPO) was being set up as a means to combat corruption.

"The risk may be a bottle neck. There are many plans that can happen. Let's give it [the CPO] a chance because nothing is working."

But he expressed disappointment with the government opting to increase the fuel levy.

"We are very positive on corruption though disappointed with the fuel levy," said Mulder.

Budget prioritises job creation: Gigaba - Sapa

The 2013 Budget unveiled by Finance Minister Pravin Gordhan on Wednesday underscored government's priority of job creation, said Public Enterprises Minister Malusi Gigaba.

"The Budget underscores the priority of this administration, its job creation, particularly through infrastructure development," he said.

South Africa had to be turned into a "construction site" to do this, and progress was already being made in this regard.

Gigaba said corruption needed to be rooted out to ensure all public money could be used to benefit the country.

Gordhan's budget balanced: Naamsa - Sapa

Minister Pravin Gordhan tabled a balanced and innovative set of budget proposals intended to support growth and employment, the National Association of Automobile Manufacturers of SA (Naamsa) said on Wednesday.

"Encouragingly, the budget proposals contained no major tax shocks and in fact provided generous personal income tax relief to the extent of R7.3 billion," said Naamsa president Johan Van Zyl in a statement.

He welcomed Gordhan's commitment to fiscal discipline, saying the budget confirmed the importance of continued infrastructure development.

Van Zyl was also pleased about the planned review of the tax policy framework.

Naamsa was pleased by government's undertaking to introduce support mechanisms for bio-fuel production and the upgrading of oil refineries to produce environmentally friendly and cleaner fuels.

"The availability of clean fuels, consistent with international specifications, is imperative to enable vehicle manufacturers, importers and distributors in South Africa to offer consumers the benefits of high technology, highly fuel efficient motor vehicles," said Van Zyl.

ACDP welcomes budget - Sapa

The African Christian Democratic Party broadly welcomed what it described as "conservative budget" by Finance Minister Pravin Gordhan on Wednesday.

MP Steve Swart said the minister was not swayed from "government's prudent, counter-cyclical fiscal policy" -- despite negative factors such as the labour unrest in mining and agriculture.

Swart did, however, warn the budget deficit and spiralling debt service costs should be contained.

"The size of the budget deficit at present results in debt service costs rising faster than any other category of spending over the medium term, which crowds out spending on developmental priorities," he said.

A greater focus on implementing the National Development Plan (NDP), as well as the R827 billion committed to infrastructure projects won favour with Swart.

"This (NDP), together with the infrastructure development projects will stimulate economic growth, create jobs and make our country more competitive internationally."

Bigger allocations to departments in the criminal justice system were also welcomed.

"In view of public outrage at widespread sexual abuse of vulnerable women and children, both the criminal justice and social development (social workers) sectors need substantial strengthening."

Gordhan 'opens doors to DA policies' - Sapa

Finance Minister Pravin Gordhan has opened the door to several DA policies in his 2013 Budget, the party said on Wednesday.

"He has opened the door to some DA policies -- first and foremost the idea that the youth wage subsidy is back. In a watered down form its about R5 million rand for that youth wage subsidy," Democratic Alliance shadow minister of finance Tim Harris said.

"The previous incarnation was 1.6 billion, nevertheless it is there and I hope he has the political capital to implement it."

Harris was speaking after Gordhan tabled the 2013 Budget in the National Assembly in Cape Town.

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