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#Budget2016: Finance minister to brief business, MPs

Pravin Gordhan yesterday delivered a Budget aimed at restoring confidence in the economy.

Finance Minister Pravin Gordhan delivering his national Budget speech in Parliament on 24 February 2016. Picture GCIS.
Finance Minister Pravin Gordhan,Budget speech,Budget,Budget 2016,South Africa Budget
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CAPE TOWN – Finance Minister Pravin Gordhan will today brief business and members of Parliament (MPs) after delivering a Budget aimed at restoring confidence in the economy and staving off a possible ratings downgrade. 

Yesterday, the minister stopped short of saddling already hard-pressed taxpayers with an increase in the personal income tax rate, although high earners will be paying a little more. 

Instead, he hiked user-pay levies for fuel and introduced new ones for tyres and fizzy drinks. 

Gordhan cracked down on government's bloated wage bill, saying R25 billion could be saved over the next three years by freezing vacant, non-essential posts.

He signalled structural reforms, saying government was looking at public/private partnerships, especially when it came to getting state-owned companies into shape.

WATCH: Budget 2016 in 60 seconds

Gordhan was frank about the economy’s dire state, forecasting growth of less than one percent for this year. But he says with united action, it can be turned around.

“In acting together we can address declining confidence and the retreat of capital and we can combat emerging patterns of predatory behaviour and corruption.”

WATCH: Gordhan announces R5.5bn in tax relief

The Finance Department's tax proposals for the 2016/2017 financial year.

The minister has re-jigged spending, taking money away from some programmes to fund the university fees shortfall, provide drought relief and help communities struggling without water.

He is committed to paying down government’s debt faster and has added R11.5 billion to social grants over the next three years in the light of the increased cost of living.

REACTION

Meanwhile, the Public Servants Association (PSA) says the minister’s plan to freeze posts in government will have an impact on the services people receive.

While Gordhan says many vacant posts will be frozen to save money on government’s wage bill, the PSA’s Leon Gilbert says that will have a negative impact on citizens.

At the same time, Agri SA says it was surprised the minister did not address food prices in his speech.

Gordhan mentioned a relief fund will be made available to assist farmers through the current drought, but didn’t elaborate on the effects thereof on consumers who face increasing prices. 

Agri SA’s chief economist Thabi Nkosi says, “He mentioned that the drought has an impact on growth, but we cannot also forget that this drought also affects consumers. A lot of those who are receiving social grants will be left food insecure, largely because of the rate at which food prices are increasing.”

Consolidated government expenditure for 2016/17 will amount to R1.46 trillion.

SUGAR TAX

One measure Gordhan has announced to boost the state's coffers is a sugar tax on sweetened drinks, which will come into effect from April 2017.

Apart from generating much-needed revenue, some health experts believe the sugar tax will also help tackle obesity.

Health economist Nicholas Stacey says if government adds such a tax of at least 20 percent it will generate considerable income for government.

“We’ve done some wok to estimate annually what the effect of this 20 percent tax would be on revenue, and we find that it would raise about R6 billion to 7 billion a year.”

RELIEF

In terms of the announcement of more than R5 billion in personal income tax relief, Old Mutual’s Derick Ferreira says Gordhan focused more on curbing state spending as opposed to burdening consumers with higher taxes.

Gordhan says the 2016 budget should create confidence and optimism among South Africans.

But he’s warned that compromises will have to be made.

The highlights of Finance Minister Pravin Gordhan’s 2016/17 Budget speech.

ECONOMISTS

Gordhan exited Parliament to the sound of a standing ovation yesterday, but economist George Glynos says it was lukewarm.

“Close, but 'not all the way' is how I would characterise this Budget.”

Business Partners' Ben Bierman feels the minister's speech did the job.

“If I were a ratings agency, I’d have been impressed with what the minister had to say.”

The contrasting reactions among experts reveal the fine margins Gordhan had to navigate.

(Edited by Tamsin Wort)

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