Pravin Gordhan Budget Speech 2014

26 February 2014 - 16:04 By Times LIVE, Sapa
Minister of Finance, Pravin Gordhan. File photo.
Minister of Finance, Pravin Gordhan. File photo.
Image: Leanne Stander

All the 2014 Budget Speech news in one place

You can read the full speech as a pdf here.

HIGHLIGHTS OF THE 2014 BUDGET - Sapa

BUDGET FRAMEWORK:

-- Budget deficit of four percent of GDP expected for 2013/14, narrowing to 2.8 percent in 2016/17;

-- Debt stock as percentage of GDP to stabilise at 44.3 percent in 2016/17;

-- Tax revenue for 2013/14 expected to be R1 billion higher than projected in 2013 budget;

-- Real growth in non-interest spending to average 1.9 percent over next three years;

-- National and provincial government expenditure on travel, catering, consultants and other administrative payments declines as a share of spending;

-- Expenditure ceiling commits government to spending limits of R1.03trn in 2014/15, R1.11trn in 2015/16 and R1.18trn in 2016/17.

SPENDING PROGRAMMES: Over the next three years, government will spend:

-- R410bn on social grants;

-- R15.2bn on the economic competitiveness and support package;

-- R8.5bn on the Community Work Programme;

-- R8.7bn on settlement of land restitution claims;

-- R7bn for subsistence and smallholder farmers;

-- R78bn on university subsidies and R19.4bn for the National Student Financial Aid Scheme;

-- R34.3bn on school infrastructure;

-- R22.9bn to upgrade commuter rail services;

-- R143.8bn to support municipal infrastructure;

-- R42bn on the HIV and Aids conditional grant.

TAX PROPOSALS:

-- Personal income tax relief of R9.3bn;

-- Adjustments to tax tables relating to retirement lump-sum payments;

-- Measures to encourage small enterprise development;

-- Clarity on valuation of company cars for fringe-benefit tax purposes;

-- Reforms to tax treatment of the risk business of long-term insurers;

-- Amending rules for VAT input tax to combat gold smuggling;

-- Measures to address acid mine drainage;

-- Adjustment of the proposed carbon tax and its alignment with desired emission-reduction outcomes identified by the environmental affairs department.

Tax by stealth - TJ Strydom

South Africa is still reeling from the “hospital pass” president Jacob Zuma got when he took office, said Finance Minister Pravin Gordhan yesterday.

“We experienced a once-in-70-year economic earthquake, the aftershocks of which are not yet over,” said Gordhan as he tabled the Budget in Parliament.

The years since the 2009 recession has seen government running large budget deficits as it has tried to lesson the effects of the downturn on both the individual and business.

Gordhan's approach has been one of tax by stealth.

Sanlam Investment economist Arthur Kamp said that there were no surprises in the Budget speech. “Gordhan [stuck] closely to the expenditure and revenue projections laid out in the Medium-Term Budget Policy Framework.”

Treasury is keeping it tight. “Real non-interest expenditure growth came just below 2% a year for the next three years, revenue for 2013/14 was ahead of budget and there were no new taxes,” said Kamp.

Though he made no radical announcements yesterday, Gordhan's budget is a bit easier on the emerging middle-class this year.

Gordhan announced personal income tax relief to the tune of R9.25 billion, saying that 60% of it will benefit those earning more than R250000 a year.

With the general election due in May, Treasury has adjusted the personal income tax brackets upward by more than last year. This means less of that nearly invisible “bracket creep” that would see you pay more income tax as most of your previous year's salary increase falls into a higher tax category.

Last year Gordhan's team was desperate to harvest more from income taxpayers as the drawn-out strikes in the mining sector cost it billions in lost revenue. The middle-class last year saw their brackets adjusted by only about 3.5% when inflation was nearly 6%.

And it worked. The SA Revenue Service gathered R1-billion more than planned and the budget deficit is projected to have been 4% last year, lower than the 4.2% projected in October.

This is despite slower economic growth, which Statistics SA announced earlier this week was only 1.9% last year, the second lowest number in a decade.

Gordhan has also put his plans for a tax on carbon emissions on ice for another year, saying that it will only by implemented by 2016 after “further consultation”.

Treasury has again revised its growth forecast for this year downward and expects the economy to expand by 2.7% in 2014 and 3.2% in 2015.

“To make more rapid progress in creating jobs and reducing poverty, we have to grow our economy at 5% a year or more,” Gordhan told Parliament.

Gordhan affirmed his commitment to lower the deficit over the medium term, saying that the deficit will shrink to 2.8% and the country's net debt will also stabilise around 45% of the gross domestic product over the next two years.

International trends  - Jan-Jan Joubert

Finance Minister Pravin Gordhan had harsh words for developed nations and few words of solace for South Africans when he turned to the global financial outlook during his budget speech yesterday.

His strongest encouragement to battle-weary South Africans on the international situation was that the recent weakening of the rand has been "supportive of export growth while reducing the country's reliance on capital inflows."  

He also stated that the rand is an effective shock absorber against global volatility.

Both Gordhan and Reserve Bank Governor Gill Marcus played down the negative effects of the weaker rand when quizzed about it at a press conference at Parliament yesterday.

In his budget speech, Gordhan emphasised that the global economy, with which South Africa is connected, is not yet on a path of sustained recovery.

Global economic growth benefited from a recovery in developed economies. This is expected to continue over the next two years.

A major challenge for developing economies like South Africa's is the tapering of the US Federal Reserve's quantitative easing programme, which has led to considerable swings in capital flows in South Africa and other emerging markets.

"Interest rates are likely to rise. Currencies will be weaker and volatile," Gordhan predicted.

He pointed out that growth in Europe, a major trading partner for South Africa, remains subdued, and that doubts about the European banking system remains.

Better news for South Africa is that growth remains dynamic in two of the three major markets of the global South with which South Africa increasingly trades.

China is growing at 7,5% per year and India at 5,4% per year. Brazil, however, only grows at 2,3% per year.

The African continent's economy is expected to grow at 6% per year over the next two years.

Gordhan saved his harshest words for "certain quarters of the developed world."

Whilst welcoming the "constructive tone" eminating from last weekend's G20 meeting in Australia, and especially the commitment to increase global output by $2 trillion and increase jobs, the finance minister was scathing about certain developed nations.

"We remain concerned about the self-justifying narrative from certain quarters in thye developed world - the idea that emerging markets are the problem, that they must get their houses in orderand that global cooperation for a more humane and sustainable future is a project for another day," Gordhan said.

"These are voices from precisely those places where huge regulatory failures led to the financial earthquake we have experienced.

"Geo-political gamesmanship is the order of the day; collaboration in increasing global challenges is deferred and global statesmanship is in retreat," Gordhan claimed.

He emphasised that the country had to ensure that its fiscal and monetary choices keep inflation low and support gains in competitiveness.

"While we have made significant progress in accumulating reserves, there is scope for future improvement. This will support the stability of the currency," the finance minister said.

Emotional Gordhan bids farewell - Jan-Jan Joubert

An emotional Finance Minister Pravin Gordhan tabled possibly his last budget yesterday, repeatedly pleading with South Africans to work together and to put the country's interests before their own.

Speculation on Gordhan's possible replacement after the election is rife in certain quarters, but he made it clear to the parliamentary press corps yesterday morning that he was not going to comment on his future because he serves solely at the pleasure of the President, whose prerogative it is to appoint Cabinet.

Gordhan droned on through a budget speech which was more than two pages longer than last year's speech.

But shortly before the conclusion of his speech, he became uncharacteristically emotional after thanking his family for their support, and deviated from his prepared text in a clearly heartfelt call for unity.

The National Assembly was not quite as full for the budget speech as it has been in the past, although Cabinet was well represented.

Gordhan wore a business suit and an almost Tory blue tie and continued to preach the fiscal conservatism which South Africa has attempted to live by since 1996.

Members of Parliament were less spectacularly dressed than for the State of the Nation debate, the exceptions being Ministers Lindiwe Sisulu in pink and Tina Joemat-Petterson in black, as well as Deputy Speaker Nomaindia Mfeketo in white.

Inkatha leader Mangosuthu Buthelezi was late as always, but still arrived before DA finance spokesperson Tim Harris, who arrived last.

Gordhan's predecessor, Trevor Manuel, sat in his front bench - inscrutably dour. At the end of the speech, however, he got up and hugged Gordhan warmly.

Gordhan lifted the mood early by assuring MPs they would not be paying more tax this year. At an MPs salary, that makes a huge difference, so he received the only truly wild reaction of the day.

ANC MPs dutifully applauded as Gordhan rattled off statistics, even raising a cheer when the rather cheerless news of the small increases in social grants were announced.

DA MPs awoke from their apparent slumber to growl dismissively when Gordhan announced that the first unit of the much-delayed Medupi power station is to be completed at the end of the year.

Opposition MPs really got going when Gordhan referred to new procurement rules, shouting out their favourite word in this election year: "Nkandla! Nkandla!"

As always the heightened sins taxes provoked much reaction, with Higher Education Minister Dr Blade Nzimande surprising all by applauding wildly, whilst Sports Minister Fikile Mbalula - a well-known whiskey connoisseur - staunchly withheld any visible sign of support.  

Reaction from MPs on Budget - Denise Williams, Aphiwe deKlerk and Thabo Mokone

Finance Minister Pravin Gordhan's budget speech was largely welcomed by opposition parties as generally conservative but bold.

DA MP Tim Harris said Gordhan's budget held the line against populist pressure but provided no real tax concessions.

He said there were few bold reforms to achieve growth and tackle unemployment.

Gordhan made the right noises about implementing the National Development Plan (NDP) in the future but very little had been done in the face of “ideological enemies” at the highest level of government, said Harris.

Cope MP Nick Koornhof said Gordhan had towed the party line but his efforts would keep credit rating agencies at bay.

But he said one negative was an increase in the already expensive fuel levy.

IFP leader Mangosuthu Buthelezi, said Gordhan had admitted to the country's problems but he struggled to address them because he could not make promises outside of the global economic context.

ACDP MP Steve Swart said the budget was now firmly aligned with implementing the NDP.

United Democratic Movement’s Nqabayomzi Kwankwa said Gordhan was realistic about what could be achieved in light of challenges and fiscal constraints.

“We are happy when he speaks of tax incentives for companies that support and promote enterprise development,” he added.

FF Plus leader Pieter Mulder agreed incentives and less red tape would aid job creation.

“He realises that our future lies there, that's where we can create jobs,” he said.

ANC Secretary-General Gwede Mantashe lauded Gordhan's measures to tackle corruption, particularly in government's procurement of office accommodation.

But he stressed the private sector also needed to play its part to combat corruption and desist from inflating prices.

“The property industry was given a particular strong warning to actually desist from exploiting government deals and I think we should pay attention to that issue,” he said.

Cas Coovadia, CEO of Business Unity South Africa, said his organisation was behind any moves to “pluck holes” in government procurement and more treasury oversight was needed.

“If anybody in the private sector is actually acting in a way that's contrary to good and morally sound business practices I think they must be called to account,” he said.

MEDUPI DELAYS HELD BACK GROWTH: GORDHAN - Sapa

The delays in bringing the new Medupi power plant on line may have hampered South Africa's economic growth, Finance Minister Pravin Gordhan conceded on Wednesday.

"It is very clear that electricity has been a constraint on growth," Gordhan told reporters ahead of his 2014 budget speech.

"The delays at Medupi are unfortunate... really they're regrettable because if we had those supplies earlier the economy might have grown a little bit better and might have created a bit more certainty in our environment.

"But... there is not much we can do about that," he added.

After several delays, it is expected that the first of six 794MW units at Medupi will start producing electricity in the second half of this year.

The Estimates of National Expenditure show that for the next three years the bulk of the energy department's budget will go to Eskom and expanding the national energy grid.

It reveals that Treasury has made an allocation of R190 million to the SA Nuclear Energy Corporation to improve its facilities.

It, however, gave no indication of far greater amounts that will be needed to procure 9600MW of nuclear power, in a surprise step announced by President Jacob Zuma a fortnight ago.

"The additional funding is to make improvements to the SAFARI-1 nuclear reactor, conduct research and development and upgrade and refurbish the Pelindaba facilities in 2014/15," the Estimates of National Expenditure states.

The research reactor has been in operation at Pelindaba for nearly 40 years.

BUDGET FOCUS ON WATER INFRASTRUCTURE - Sapa

Water affairs is set to focus its main effort over the next three years on providing bulk infrastructure for water and sewage, according to the budget tabled by Finance Minister Pravin Gordhan on Wednesday.

The 2014 Estimates of National Expenditure pegs total department spending at R12.5 billion next year, R16.1bn in 2015/16, and R17.2bn in 2016/17.

"The spending focus over the medium term will be on providing bulk infrastructure for water and wastewater treatment works which link water sources to local government infrastructure."

Of the total R45bn to be spent over this period, about R28bn is earmarked for the department's regional implementation and support programme, and about R11bn for its water infrastructure management programme.

The provision of water and sanitation to households has been under the spotlight in recent months, following a spate of service delivery protests.

In his budget speech on Wednesday, Gordhan, referring to President Jacob Zuma's state-of-the-nation address delivered a fortnight ago, noted that the protests "are a sign that our people want government to quicken the pace of delivery of housing, water and sanitation".

According to the estimates document, skills shortages continue to plague the department.

"At the end of November [last year], the department had a funded establishment of 4261 posts, with 219 additional to the establishment and 491 vacant.

"The vacancies were due to the difficulty experienced in attracting people with the critical and scarce skills necessary to perform vital tasks, which is why the department uses consultants when required."

Spending on consultants was expected to increase from R362.3m next year (2014/15), to R477.9m in 2016/17.

SOCIAL DEVELOPMENT BUDGET UP 10 PERCENT - Sapa

Social development's R144.5 billion budget for 2014/15 will benefit from the removal of people not eligible for grants, Finance Minister Pravin Gordhan said on Wednesday.

Tabling his 2014 Budget in the National Assembly, he told MPs: "One million invalid beneficiaries were removed from the system. Social grants are meant for those who need them most."

In 2012 and 2013, all social grant beneficiaries were required to re-register with the SA Social Security Agency. This was aimed at eliminating fraud and corruption, and cleaning up the beneficiary database.

According to the 2014 Budget, 340,000 old age and disability grants were cancelled in August last year because beneficiaries failed to re-register.

In October last year, 300,000 children were removed from the system because their guardians failed to present them.

Between April 2012 and December last year, 299,000 grants were removed, either through ineligible beneficiaries voluntarily cancelling their grants, or by the removal of beneficiaries who had not claimed.

Gordhan said the recent re-registration of grant recipients and the introduction of a new payment system had lowered the cost of administration.

It now cost R16.40 to pay each beneficiary a grant, compared to around R32 per beneficiary per month five years ago.

The social development budget was 10.3 percent up on the previous financial year.

Gordhan said the number of grant recipients had increased from 13.1 million in 2009, to 15.8 million today.

Old age and disability grants would increase in April, from R1270 to R1350 a month.

The foster care grant would increase from R800 to R830 a month.

The child support grant would increase from R300 to R310 a month in April, and to R320 in October.

The 2014 Budget made provision for establishing a public substance abuse treatment centre in each province, in line with the requirements of the Prevention of and Treatment for Substance Abuse Act of 2008.

Currently, there are only seven public treatment centres in four provinces, and these are located in the cities.

The budget proposes additional allocations of R50m each year, over the next three years, for centres in Northern Cape, Eastern Cape, North West and Free State.

GORDHAN STATES COMMITMENT TO NDP - Sapa

Finance Minister Pravin Gordhan on Wednesday said his budget was based on the National Development Plan (NDP) and the next administration would have a solid platform for implementing it.

"The NDP reflects the priorities underpinning this budget, and prepares the ground for the next phase of our economic and social transformation," he said in his 2014 budget speech, two months ahead of the May elections.

Gordhan said government's commitment to the NDP meant striving for five percent growth, reducing poverty, speeding up infrastructure investment, phasing in the National Health Insurance and professionalising the public service.

He warned, however, that implementing the plan would require financial discipline, better productivity and a firm commitment to curbing waste.

At a media briefing earlier, Gordhan pointed to the estimates of national expenditure's chapter on the presidency, under which the planning department fell, saying the "proof of the pudding is in the ENE [estimates of national expenditure]".

The document references the dictates of the NDP in explaining its allocations for every department.

It shows that its budget is set to grow by an average of 13.2 percent annually for the next three years but remains more than three times smaller than that of the presidency or the National Youth Development Agency.

The NDP has been rejected by some unions in the labour movement, causing tension within the ruling alliance and raising questions about government's commitment to implementing it.

Government is also ignoring its caution that the country should steer away from nuclear energy. President Jacob Zuma confirmed in his state of the nation address a fortnight ago that government would soon conclude the procurement of 9600 megawatts of nuclear energy.

HOUSING SHIFTING TO MUNICIPALITIES - Sapa

Government is shifting the responsibility of providing low-income housing to certain municipalities, according to the 2014/15 budget tabled in Parliament on Wednesday.

The National Development Plan recommended that responsibility for housing should shift to municipal level, where human settlement planning takes place.

According to the budget review document, government had therefore introduced a municipal human settlements capacity grant from 2014/15.

This year, human settlement programmes would be transferred from provinces to six metropolitan municipalities.

Another initiative would address suitable sanitation systems in households.

Cabinet approved a sanitation programme to quicken the eradication of bucket toilets.

As a result, the capital assets budget was set to increase by R1.9 billion in 2014/15 and 2015/16. This would remove around 273,300 bucket toilets from homes in formal and informal areas in the next two years.

Another programme would be developed this year to support poor rural municipalities in providing on-site sanitation services. These would be funded through the rural household infrastructure grant.

In his 2014 budget speech Gordhan said over R70bn had been spent on human settlement programmes over the last five years, contributing to 590,000 houses being built.

The capital restructuring grant would contribute to the delivery of around 18,000 medium density rental housing units for families with an income of between R1500 and R7500 per month.

Through the housing development finance programme, provinces and municipalities were expected to deliver an extra 215,621 low income houses and upgrade a further 225,505 sites for development over the medium term.

Housing development had been budgeted R34.8bn for the new financial year.

R2.1BN FOR MILITARY VETERANS' PENSIONS - Sapa

Treasury has allocated R2.1 billion to benefits for military veterans over the next three years as part of a general increase in social pay-outs in the pre-election budget tabled on Wednesday.

The budget allocation for military veterans will rise to R504.2 million in 2014/15, and to R608 million and R614 million in 2015/16 and 2016/17, according to the 2014 Estimates of National Expenditure.

The document, tabled by Finance Minister Pravin Gordhan, foresees that government will provide health services to 7000 veterans this year, with that figure increasing to 12,000 by 2016/17, at a cost of R94 million.

The defence budget will also fund the provision of 6,000 houses to former combatants.

A key focus of the defence budget over the next three years is funding security operations along and outside South Africa's borders -- ranging from anti-pirating measures to active peace enforcement on the continent.

In the past financial year, Treasury increased allocations to the military by R271.9 million to fund peace operations in the Democratic Republic of Congo (DRC) and the Central African Republic (CAR).

At an African Union conference earlier this month, President Jacob Zuma pledged R11 million to help fund the African-led International Support Mission in the Central African Republic (Misca).

Over the three-year, medium-term expenditure period, the budget provides for R150 million in support of the UN-approved intervention brigade in the DRC.

SIN TAXES UP AGAIN - Sapa

South Africans will from Wednesday have to reach deeper into their pockets to pay for alcohol, cigarettes and fuel.

Finance Minister Pravin Gordhan stuck with tradition in his annual budget and again raised sin taxes.

A packet of 20 cigarettes will now cost you 68 cents more.

Whisky drinkers will pay R4.80 cents more for a bottle of the beverage, while the price of a 340ml can of beer goes up nine cents.

However, the duty rate on traditional African beer remains unchanged.

These tax increases take effect immediately.

The fuel levy is set to increase by a total of 20 cents a litre from April 2.

This includes the eight cents a litre which will go towards the Road Accident Fund.

TAX REVENUE KEEPS GROWING: GORDHAN - Sapa

Despite moderate economic growth, tax revenues have remained buoyant over the past year, Finance Minister Pravin Gordhan said on Wednesday.

"In 2013/14, we will collect R899 billion. This is R1bn more than we projected last February, and R4bn above the estimate presented at the time of the 2013 Medium-Term Budget Policy Statement," he told the National Assembly in his 2014/15 budget speech.

For the first time since the recession, corporate income tax revenues would exceed the 2008/9 peak of R165bn.

Gordhan said that in 1994, tax revenue amounted to R114bn. Revenue collected next year would exceed R1 trillion.

This was nearly a tenfold increase in nominal terms. This was achieved while reducing the tax rate for companies from 40 percent, in 1994, to 28 percent, and the top marginal rate for individuals from 45 percent, in 1995, to 40 percent, he said.

During this period, the contribution of corporate income tax as a proportion of total revenue had nearly doubled.

"We have also improved the fairness of the tax system by taxing residents on their worldwide income and taxing capital gains."

These changes had brought the South African tax system more in line with international principles and had substantially broadened the tax base.

The main tax proposals for the 2014 Budget included personal income tax relief of R9.25bn. About 40 percent of the relief went to South Africans earning below R250,000 a year.

The tax-free, lump-sum amount paid out of retirement funds would be increased from R315,000 to R500,000, benefiting especially lower income members who did not benefit from deductible contributions.

Excise duties on alcoholic beverages and tobacco products would increase by nine cents per 340ml can of beer and 68 cents a packet of 20 cigarettes. The price of whisky would increase by R4.80 a bottle. These increases took effect immediately.

"In recognition of recent increases in the imported cost of fuel, the general fuel levy increase is limited to an inflation-related 12 cents per litre on 2 April 2014, and the Road Accident Fund levy will increase by eight cents per litre," he said.

Legislation to allow for tax-exempt savings accounts would proceed this year to encourage household savings.

Complementing this tax reform, a new top-up retail savings bond would be introduced by the National Treasury this year, allowing for regular deposits into a government retail bond.

It would also be accessible to community savings groups, such as stokvels. Options for introducing a sukuk retail savings bond were also being explored.

The Income Tax Act currently required philanthropic foundations to distribute 75 percent of the money they generated within a year.

This requirement was unduly restrictive and would be relaxed, while ensuring that accumulated capital was distributed to worthy causes within a reasonable period.

Regulatory and other measures had been put in place to address the environmental consequences of acid mine drainage.

"To complement current efforts and ensure that the mining sector makes its fair contribution towards continuing acid mine drainage expenses, consultations will be initiated on an appropriate funding mechanism," he said.

Following public consultation, the Treasury and the environmental affairs department had agreed that a package of measures was needed to address climate change and to reduce emissions.

This would include the proposed carbon tax, environmental regulations, renewable energy projects and other targeted support programmes.

To allow for further consultation, implementation of the carbon tax was postponed by a year to 2016.

Gordhan said reforms to the tax treatment of risk business for long-term insurers were also proposed.

Profits from the risk business of a long-term insurer would be taxed in the corporate fund, similar to the way short-term insurers were taxed.

The first recommendation of the tax review committee -- headed by Judge Dennis Davis and appointed last year to make recommendations for possible reforms -- related to small and medium enterprises.

These proposals were taken forward in this budget. The committee had also started working on base erosion and profit shifting -- trends that were under scrutiny internationally.

During 2014, work would be undertaken on the impact of the tax system on economic growth and job creation, and aspects of VAT, mining taxes and estate duties.

On tax administration, Gordhan said that in the past five years, the tax register of individuals grew from 5.5 million to over 15m to include all known economically-active individuals.

Companies on the tax register now stood at more than 2.3m. The number of employers registered for pay-as-you-earn was nearly 404,000.

In the next fiscal year, the SA Revenue Service would implement single registration of taxpayers and traders for the main taxes.

SARS was already working closely with other government agencies to share non-confidential electronic data.

"Without compromising privacy and confidentiality, this will contribute to reducing identity fraud, lower administration costs and enhance compliance," he said.

New global tax policies were being devised to counter harmful tax practices, and treaties were being designed to allow for the automatic exchange of information. SARS currently chaired the 121-country Global Forum for the Exchange of Information for Tax Purposes.

Since the Tax Administration Act came into effect, SARS had recognised 11 bodies to which tax practitioners had to belong, and 15,000 tax practitioners were now registered with them.

Taxpayers were advised to only use tax practitioners recognised by SARS.

Over the past two years, the voluntary disclosure programme had realised almost R5bn from income that was not previously declared, he said.

HEALTH GETS R145BN - Sapa

The health department will get R145.7 billion in the 2014/15 budget.

Of this amount, R52.3bn is for district health services; R26.7bn for provincial services; and, R24.3bn for central health services.

About R7.7bn is earmarked for spending on health infrastructure.

Tabling his budget in the National Assembly on Wednesday, Finance Minister Pravin Gordhan said spending on healthcare had produced visible results.

"But the improvements to this country's health system over the past five years are best seen in our rising life expectancy, the reduction in infant, child and maternal mortality, and the changed lives of 2.5 million people who now have access to antiretrovirals."

He said R41bn had been spent on HIV and Aids programmes over the past five years, and R43.5bn was budgeted for the next three.

"We have spent R38bn on 1879 hospitals and other health facility projects, and R26 billion is allocated over the Medium-Term Expenditure Framework period ahead."

A once-off allocation of R30 million had been made for another South African demographic health survey, which collected population-based health data.

The survey is normally carried out every five years, but has not been done since 2003/04.

According to the 2014 Estimates of National Expenditure, tabled by Gordon, the spending focus over the medium term is on increasing life expectancy and reducing the burden of disease.

 

GORDHAN SILENT ON HIS FUTURE - Sapa

Finance Minister Pravin Gordhan on Wednesday said he would not answer questions on whether he was tabling his last budget, or would return to his portfolio after the May elections.

"All of us serve at the pleasure of the president. Wait for the elections and the occasion when the president formally tells you what his Cabinet is going to look like. I invite you to be disciplined," he told a media briefing ahead of his budget speech.

"No questions on that issue need to be accommodated."

In the briefing, Gordhan later pointed out that he was not tabling a "four-month budget" but a medium-term expenditure framework for three years, suggesting that there would be fiscal stability regardless of the change of administration in May.

The minister recently hinted in a newspaper interview that he may end his tenure as finance chief after the poll, saying if he did so the reasons would be partly political, partly personal.

However, he added, in the end the decision would rest with the ruling party.

HOUSEHOLD DEBT CONCERNING: GORDHAN - Sapa

The level of over-indebtedness of households is concerning, Finance Minister Pravin Gordhan said on Wednesday.

Tabling his 2014/15 budget in the National Assembly, he said government recognised the need to protect and improve the financial well-being of households, to make them less vulnerable to a sudden loss of income in bad times.

"We recognise that households must be encouraged to invest in their future, including investment in homes or productive assets, and saving for retirement or business purposes," he said.

South Africa had made good progress towards achieving the National Development Plan's goal of 90 percent access to financial services by 2030.

Some 79 percent of adult South Africans were using regulated financial services in 2013.

Many more households had access to affordable credit, which was of great benefit when used productively, but bad when used to fund excessive consumption.

"Government is concerned about the level of over-indebtedness of households," Gordhan said.

Cabinet had therefore approved a number of measures to assist such households reduce their debt burden, and to stamp out abusive and fraudulent activities of reckless lenders and unscrupulous debt collectors.

"Working jointly with the ministers of trade and industry and justice, we will shortly commence actions against abusive and unsustainable practices."

With regard to retirement, Gordhan said there would be further reforms over the period ahead.

Legislation had already been passed by Parliament to improve governance over pension and provident funds, and to align the rules and tax treatment of pension and provident funds, while at the same time protecting vested rights.

"We still seek improved coverage and preservation of retirement funds, and lower costs in the system.

Government was consulting, within the[National Economic Development and Labour Council, on measures to cover the six million employed South Africans who did not enjoy access to an employer-sponsored retirement plan.

"We intend to move progressively towards a mandatory system of retirement for all employed workers."

Agreement had been reached with the Association of Savings and Investment of SA on a way forward to reduce the level of charges for retirement savings products. Draft regulatory reforms would be published shortly, Gordhan said.

WEAK RAND A 'SHOCK ABSORBER': GORDHAN - Sapa

Finance Minister Pravin Gordhan on Wednesday looked to the bright side of the weak local currency, terming the rand a "shock absorber".

"The rand remains an effective shock absorber against global volatility," Gordhan said in his last budget speech before national elections.

"Recent movements of the currency have been supportive of export growth while reducing the country's reliance on capital flows."

The sentiment was echoed by Reserve Bank governor Gill Marcus, who said the rand was acting as a stimulant to exports and also, potentially, to local manufacturing as the price of imports went up.

"South Africa follows a flexible exchange rate approach precisely because the exchange rate is the shock absorber, which is doing its job," Marcus told a joint media briefing with Gordhan ahead of his budget speech.

She added: "The depreciating currency actually acts as a stimulus, if you look at the actual revenue numbers... it also enhances our competitiveness.

"The other element of it is that your imports become more expensive, as we have seen. It is an opportunity again for South African business to look at what its production is like. Is there a possibility of import substitution that takes place?"

Marcus said this did not mean that authorities were encouraging currency depreciation, but it was "a fact" that flowed from the post-crisis normalisation of developed economies, in particular the United States.

Tapering by the US Federal Reserve began last month and has seen the rand weaken by some eight percent.

GLOBAL RECOVERY HOLDS OPPORTUNITIES FOR SA: GORDHAN - Sapa

As global economic growth recovers there will be opportunities and risks for South Africa's economy, Finance Minister Pravin Gordhan said on Wednesday.

"These developments have the potential to increase our exports," he told the National Assembly in his 2014 Budget speech.

The global economic outlook remained unsteady -- some advanced economies had returned to growth, while others continued to lag.

The slowdown in quantitative easing by the US Federal Reserve had caused further uncertainty to financial markets, currency volatility and capital outflows from emerging markets.

"South Africa's economy has continued to grow, but more slowly than projected a year ago. We expect growth of 2.7 percent this year.

"A weaker exchange rate is a risk to the inflation outlook, but it supports exporters. Sustained improvements in competitiveness require further investment in infrastructure and a range of micro-economic reforms," he said.

Among South Africa's emerging market partners, growth remained strong, but demand for mineral products had moderated and was unlikely to pick up soon.

"The prices of our largest sources of foreign earnings remain depressed."

However, the rand remained an effective shock absorber against global volatility. Recent movements of the currency had been supportive of export growth, while reducing the country's reliance on capital inflows.

"We must ensure that our fiscal and monetary choices keep inflation low and maintain the recent gains in competitiveness.

"While we have made significant progress in accumulating reserves, there is scope for further improvement. This will support the stability of the currency," Gordhan said.

Growth was projected to increase from 2.7 percent this year, to 3.5 percent in 2016. Investment was forecast to increase by about five percent a year, and the current account deficit would average 5.8 percent of GDP over the medium-term, while consumer price inflation would return to levels within the target band (three to six percent) between 2015 and 2016.

Potential domestic risks to the outlook included further delays to the introduction of new infrastructure, particularly additional electricity capacity; higher inflation due to the weakness of the rand; and, protracted labour disputes, which could depress consumer and business confidence, he said.

BUDGET FOCUS ON INDUSTRIAL INCENTIVES - Sapa

Incentives for industrial development will receive the bulk of the trade and industry department's R9.8 billion budget in 2014/15.

According to the 2014 Estimates of National Expenditure, tabled by Finance Minister Pravin Gordhan on Wednesday, incentive development and administration will make up well over half of its total budget.

"This is allocated to incentives such as the manufacturing development incentives -- which contribute to the development of manufacturing industries -- and the special economic zones investment incentives."

These attracted investment to further the objectives of the industrial development action plan.

Spending on these grew by an average of 25 percent a year since 2010, largely due to the introduction of the special economic zones (SEZs) investment incentives, and the economic competitiveness and support package, which was introduced following the recession.

"The special economic zones investment incentives schemes encourages increased investment in South Africa through provision of infrastructure."

The budget for the SEZs was revised downwards by R553 million, to R3.6 bn, so preparatory work could be done before the project became operational.

"This will be used mainly for conducting pre-feasibility and feasibility studies for the proposed SEZs in all nine provinces; infrastructure projects in the existing industrial development zones; and newly-designated special economic zones through the incentive scheme."

ELIMINATE WASTEFUL SPENDING, CORRUPTION: GORDHAN - Sapa

Eliminating wasteful spending and corruption is a focus of the 2014 Budget, Finance Minister Pravin Gordhan said on Wednesday.

Tabling the budget in the National Assembly, he said it was one in which circumstances dictated that "we cannot add resources to the overall spending envelope".

"The emphasis falls therefore on ensuring that expenditure is allocated efficiently, enhancing management, cutting waste and eliminating corruption," he said.

A series of initiatives were focused on these concerns, including spending reviews to examine programme performance and value-for-money. These were being conducted by the National Treasury and performance monitoring and evaluation department, and by provincial treasuries.

The office of the accountant general had stepped up efforts to strengthen the financial control environment, and had undertaken 27 forensic reviews over the past 12 months, leading to both criminal investigations and internal disciplinary action.

As part of efforts to combat waste, cost-containment instructions were issued in January 2014. Budgets for consultants, travel, accommodation, and venue hire had been curtailed, which would contribute to savings over the next three years.

Forthcoming regulations would strengthen the National Treasury's oversight of public entities by requiring compliance with reporting requirements for spending, revenue, borrowing, and performance.

Gordhan said an initiative undertaken jointly with the public works department to review the validity and cost effectiveness of all government property leases had exposed several deficiencies.

These included accommodation that was unoccupied, but being paid for; accommodation occupied by non-governmental entities; discrepancies between the size of accommodation occupied and what was paid for; marked divergence from market rates per square metre; procurement through inappropriate non-competitive procedures; missing or invalid lease agreements; and, unsubstantiated payments to landlords.

The intervention also identified a backlog of more than half of the lease portfolio reviewed, he said.

As a result of this initiative, the public works department now had a turnaround strategy that would enable it to regularise the lease portfolio, while ensuring continuity of services to client departments.

On procurement reforms, Gordhan said the chief procurement office had been established and had made progress on several fronts, including development of a standard lease agreement to address defects in government property transactions.

Infrastructure procurement processes and documentation were being standardised, and an inspectorate to monitor procurement plans and audit tender documents was being established.

Processing of vendors' tax clearance certificates to ensure compliance was being enhanced, procurement of health equipment, drugs, and medicines was being centralised to effect savings, and the business interests of government employees were being analysed.

"We are also mindful of the importance of government procurement in supporting local industry and black economic development.

"This requires a database of South African products and black-owned businesses so that the system can foster economic empowerment and dynamically contribute to growth.

"And further, tougher measures are being considered to enforce the rule that small businesses in particular must be paid within 30 days," he said.

RADICAL ECONOMIC CHANGE NEEDED: GORDHAN -Sapa

Finance Minister Pravin Gordhan on Wednesday urged South Africans to work together to radically change the economy.

"The new economic order we seek cannot just be a pact among elites, a coalition among stakeholders with vested interests. Nor can it be built on populist slogans or unrealistic promises," he told the National Assembly during his 2014/15 budget speech.

"We have to work together to radically change our economy. This means working with our major businesses so that they sparkle across the globe."

It meant working with black entrepreneurs to grow their companies across South Africa, and beyond, working with small and large businesses to build value-chain linkages that supported dynamic, export-oriented, competitive enterprises.

"It means bringing those who are marginalised into the mainstream of opportunity and activity. It means a better standard of living for all.

"It is time for a bold vision of our future, as set out in the National Development Plan. It is time for action and implementation. It is time to move South Africa forward to the next stage of our historic journey to more rapid growth, jobs and development -- time to leave behind poverty, joblessness and inequality."

Gordhan said that while the global economic outlook remained unsteady, South Africa's economy had continued to grow, but more slowly than projected a year ago.

"We expect growth of 2.7 percent this year. A weaker exchange rate is a risk to the inflation outlook, but it supports exporters."

Despite slower economic growth, the 2013/14 budget deficit was projected to be four percent of GDP, lower than projected in October.

The deficit would narrow to 2.8 percent over the medium-term, and net debt would stabilise at about 45 percent of GDP in 2016/17.

The budget provided R9.3 billion in income tax relief to households. Government would expand its employment programmes over the next three years and continue to support job creation by the private sector.

The budget allocated R6.5bn over three years to support small and medium enterprises.

The turnover tax regime would be amended to further reduce the tax burden on micro-enterprises.

Consideration was being given to replacing the graduated tax structure for small business corporations with a refundable tax compliance credit.

Gordhan said progress was being made in overcoming infrastructure backlogs and investing for more inclusive growth and development.

Public infrastructure investment would amount to R847bn over the next three years.

The first unit of the Medupi power station was expected to be completed towards the end of this year.

Transnet had increased capacity on its coal line. Plans were in place to further expand the coal, iron ore and manganese lines.

The Passenger Rail Agency of SA refurbished 500 Metrorail coaches last year, and its new rolling stock procurement programme would get under way this year.

Spending on social infrastructure, which included health, education and community facilities, would increase from R30bn in 2012/13 to R43bn in 2016/17. Priority would be given to programmes to eradicate school infrastructure backlogs and to refurbish clinics and hospitals.

In 2014/15, a total of R40bn in infrastructure grants would be transferred to local governments for their water, sanitation, energy and environmental functions.

The private sector was also making an increasing contribution to infrastructure investment. Contracts for 47 renewable energy projects were concluded in 2012 and 2013, many of which were already under construction.

These would add 2460MW of power capacity, and investment of R70bn. A further R45bn in investment would be contracted this year.

Consumer price inflation (CPI) was expected to come in at 5.7 percent for 2013, 6.2 percent this year, 5.9 percent next year, and 5.5 percent in 2016.

Gordhan said the number of people eligible for social grants was due to reach 16.5 million by 2016/17. The recent re-registration of grant recipients and the introduction of a new payment system had lowered the cost of administration.

"One million invalid beneficiaries were removed from the system. Social grants are meant for those who need them most."

The old age and disability grants would increase in April, from R1270 a month to R1350; the foster care grant would increase from R800 to R830; and, the child support grant would increase, from R300 to R310 a month in April, and to R320 in October.

Increases in excise duties on alcoholic beverages and tobacco would add nine cents to the price of a 340ml can of beer and 68 cents to a packet of 20 cigarettes. Whisky would cost R4.80 a bottle more. These increases took effect immediately.

The general fuel levy would increase by 12 cents a litre on April 2, and the Road Accident Fund levy would increase by eight cents a litre.

Consolidated revenue for 2014/15 was expected to be R1.1trn and spending R1.25trn.

"We have achieved much over the past five years, in a very difficult post-recession climate. But there is more to do ahead, more to build, more to put right, more to learn, more to implement. We can only do this together," Gordhan said.

BUDGET 2014 BRINGS TAX RELIEF - Sapa

Income tax relief of R9.3 billion and massive future spending on social grants are among the main features of this year's pre-election budget.

Other highlights include a budget deficit that is expected to narrow to 2.8 percent of GDP by 2016/17, supporting a stabilisation of debt at 44.3 percent of GDP.

Tabling his 2014 Budget in the National Assembly on Wednesday, Finance Minister Pravin Gordhan told MPs he expected a budget deficit of four percent of GDP for this year and next (2014/15).

Tax revenue this year (2013/14) was expected to be R1bn higher than projected in the 2013 budget.

Gordhan said real growth in non-interest spending should average 1.9 percent over the next three years.

Over the next three years, government intended to spend, among others, R410bn on social grants, R15.2bn on the economic competitiveness and support package, R8.7bn on settlement of land restitution claims, R7bn for subsistence and smallholder farmers, R78bn on university subsidies and R19.4bn for the National Student Financial Aid Scheme, and R143.8bn to support municipal infrastructure.

Tax proposals included steps to encourage small enterprise development, clarity on the valuation of company cars for fringe-benefit tax purposes, and reforms to the tax treatment of the risk business of long-term insurers.

Also proposed are amended rules for VAT input tax to combat gold smuggling; measures to address acid mine drainage; and, adjustment of the proposed carbon tax and its alignment with desired emission-reduction outcomes identified by the environmental affairs department.

Consumer price inflation (CPI) was expected to come in at 5.7 percent for 2013, 6.2 percent this year, 5.9 percent next year, and 5.5 percent in 2016.

Gordhan announced that the old age and disability grants would increase in April, from R1270 a month to R1350.

The foster care grant would increase from R800 to R830, and the child support grant would increase from R300 to R310 a month in April, and to R320 in October.

Increases in excise duties on alcoholic beverages and tobacco would add nine cents to the price of a 340ml can of beer and 68 cents to a packet of 20 cigarettes. Whisky would cost R4.80 a bottle more. These increases took effect immediately.

The general fuel levy would increase by 12 cents a litre on April 2, and the Road Accident Fund levy would increase by eight cents a litre.

Consolidated revenue for 2014/15 was expected to be R1.1trn, and spending R1.25trn.

As usual, the biggest slice of the cake -- R253.8bn -- would go to education. Of this, basic education was allocated R177.6bn and university education R29.9bn.

Health was allocated R145.7bn, social protection R144.5bn, and housing and community amenities R142.9bn.

Debt service costs swallowed R114.9bn of the general public services budget allocation, with R6.8bn going to home affairs and R7.5bn to international relations and co-operation.

Altogether R115.7bn was allocated to public order and safety, with police getting R78.1bn, correctional services R19.7bn, and justice R17.9bn.

Defence was allocated R47.9bn, and transport R81.6bn. Provision was also made for a contingency reserve of R3bn.

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